For many retirees, Social Security represents a critical part of their retirement income. Conventional wisdom often suggests waiting until age 70 to start claiming benefits in order to maximize monthly payments. After all, for each year you delay past your full retirement age (FRA), your benefit rises by about 8%, potentially providing a much larger monthly check.
However, some experts caution that, while this strategy works for some, waiting until 70 might not be the best option for everyone. Health, personal finances, and life expectancy are all critical factors to consider.
This article explores why waiting until 70 might backfire for certain individuals and provides a more balanced approach to deciding when to claim Social Security benefits.
The Traditional Argument for Waiting Until 70
The conventional advice to wait until age 70 to start claiming Social Security is based on the fact that delaying benefits results in a significant increase in monthly payments. According to the Social Security Administration (SSA), the benefit increases by about 8% for each year you delay beyond your FRA.
If you wait until 70, you could receive up to 32% more than you would if you claimed benefits at FRA. This can be especially advantageous for those with longer life expectancies, as the larger monthly payments can provide more security in the later years of retirement.
The logic behind this strategy is that for individuals who live into their 80s or 90s, the higher monthly payments will eventually outstrip the total amount of benefits they would have received by claiming earlier. Financial planners often recommend delaying benefits for this reason, especially for those in good health with substantial retirement savings to tide them over.
The Potential Drawbacks of Waiting Until 70
Despite the advantages, experts are increasingly warning that delaying Social Security until 70 could be a risky move for many retirees. The key risks and drawbacks include financial strain in the early retirement years, tax considerations, and complications for spouses.
1. Longevity Risk: What If You Don’t Live Long Enough?
The most significant risk associated with delaying Social Security benefits is the possibility that you won’t live long enough to see the full benefit of waiting. If you pass away in your early 70s, for example, the larger monthly checks you would have received starting at 70 may not make up for the years you forwent benefits.
A study by the National Bureau of Economic Research suggests that for individuals with shorter life expectancies, claiming earlier could provide a better return on investment. For someone who starts collecting at age 62 (the earliest age to claim benefits), the monthly payments will be smaller, but they will begin earlier and provide more years of income. Depending on personal health and family history, this may be the better option for some individuals.
2. Depleting Retirement Savings Too Early
If you choose to delay Social Security benefits and don’t have enough other income to cover your living expenses, you may be forced to draw heavily from retirement savings. In the early years of retirement, especially if you’re not yet 70, this can deplete your nest egg more quickly than anticipated.
“Relying too heavily on retirement savings in the early years can accelerate the depletion of your funds, especially if markets are volatile,” says Lindsey L. Stevens, a certified financial planner at the Financial Planning Association. This could leave you with less savings to fall back on in your later years when you’re no longer able to work or when other sources of income become more limited.
3. Complications for Spousal and Survivor Benefits
Delaying Social Security doesn’t just affect your own benefits — it also impacts your spouse’s potential benefits. If one spouse chooses to delay their benefits until 70, the other spouse may be unable to access the larger amount for years.
Furthermore, survivor benefits could be affected. If the spouse who delayed benefits dies before reaching 70, the survivor may not receive the larger amount that was originally anticipated.
According to Kiplinger, couples should weigh the impact of delayed benefits on the household as a whole. In cases where one spouse is much older, it may be more beneficial for the older spouse to claim earlier, allowing the younger spouse to receive some form of benefits earlier.
4. Opportunity Costs: Missing Out on Early Retirement Income
Retirees often look forward to traveling, spending time with family, or pursuing hobbies that they didn’t have time for during their working years. Delaying Social Security until 70 could mean missing out on those early years of retirement income, which could otherwise fund the activities you’ve dreamed about for years.
According to Sarah E. Johnson, a retirement planning expert, “Not having access to Social Security income until 70 could mean sacrificing important life experiences in the first years of retirement when you’re still physically active and able to enjoy those opportunities.”
For many retirees, the opportunity cost of not having income earlier can outweigh the benefits of delayed Social Security payments.
What Other Experts Say: It’s Not a One-Size-Fits-All Strategy
As experts increasingly recognize, the “wait until 70” approach is not universally beneficial. David G. Johnson, a senior retirement planner, suggests that “a balanced strategy that considers health, savings, life expectancy, and family needs is crucial.
There is no single answer when it comes to Social Security. Each individual’s financial situation requires a personalized approach.”
A Flexible Approach: Balancing Early and Delayed Claims
Financial planners suggest a more nuanced approach. For example, some individuals may choose to claim Social Security at full retirement age (FRA) to access income sooner while allowing their retirement savings to grow.
Others might begin collecting early at 62 if they have health concerns or anticipate a shorter life expectancy. Some retirees may opt for a partial delay, claiming benefits at FRA and delaying a spouse’s benefits until 70.
Additionally, tools such as Social Security claiming calculators (available from the SSA and various financial planning websites) can help individuals understand the long-term financial implications of claiming early versus waiting.
Case Studies: Real-Life Scenarios
To illustrate how different factors influence the decision to delay Social Security, let’s consider two case studies:
- Case Study 1: The Healthy Retiree with Strong Savings
John, age 63, is in excellent health and has a substantial retirement savings fund. He and his wife are active and expect to live into their 80s. In John’s case, delaying benefits until 70 could make sense. He can comfortably draw on his savings for the next few years and will benefit from the higher monthly payout once he starts claiming at 70. This approach offers strong long-term financial security. - Case Study 2: The Retiree with Health Concerns
Susan, age 64, has a history of health issues and limited retirement savings. In her case, claiming at 62 would allow her to access funds sooner and provide a cushion for her medical expenses. Waiting until 70 could risk her running out of savings in the interim, especially if her health worsens. Starting early provides the security she needs to cover her living expenses and health-related costs without relying too heavily on savings.
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The Key Takeaway — Timing Is Everything
While waiting until 70 to claim Social Security benefits can provide a larger monthly payout, this strategy may not be right for everyone. Factors such as health, life expectancy, family dynamics, and available retirement income must all be considered before deciding when to start claiming benefits.
Experts suggest a balanced, personalized approach rather than adhering strictly to the “wait until 70” rule.In the end, there is no universal answer, and the decision should be based on an individual’s unique circumstances.
By carefully evaluating the various factors, consulting with a financial planner, and using available tools to model the potential outcomes, retirees can make an informed decision that ensures both short-term and long-term financial security.
FAQs About Retirement Plan
Is it ever a good idea to claim Social Security before 70?
Yes, for some individuals, especially those with health concerns or limited savings, claiming Social Security earlier may provide more immediate financial stability.
What happens if I start claiming Social Security at 62 instead of waiting until 70?
Claiming early will result in lower monthly benefits, but you’ll start receiving payments sooner. It’s important to weigh whether the trade-off is worth it given your life expectancy and financial needs.
How do I know if delaying Social Security is the best choice for me?
Consulting with a financial planner who can assess your health, savings, family situation, and long-term goals is crucial. Online calculators and resources from the SSA can also help model your expected benefits.
