If you are thinking of claiming Social Security any time before the age of 70, you should be aware that you'll be starting your checks earlier than you perhaps should. And this could be a decision you come to regret over time.
Here's why you might want to reconsider an early claim.
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Claiming Social Security before 70 could leave you with regrets
Although Social Security benefits can be started as young as age 62, doing so would result in a significant reduction in your monthly income compared to your potential maximum benefit.
Every retiree has a full retirement age (FRA), which is the age they would need to be to start receiving their standard Social Security benefit. Delaying a claim for benefits beyond your FRA increases the amount of your standard benefit up to age 70. That's because you avoid early retirement penalties that reduce your check for each month you claim it before FRA, and after FRA, you start earning delayed retirement credits that increase your monthly payment.
Since you can raise your monthly check amount each month until 70, you will get the largest payment possible if you wait until then. And maximizing the size of your monthly Social Security checks could be vitally important for a simple reason: These benefits are protected against inflation.
In recent years, surges in inflation have left many retirees seeing the buying power of their savings erode. Although there are recent signs it is cooling, inflation has been hovering around a 40-year high, with year-over-year price increases regularly topping 6.00%. Huge increases in the prices of goods and services have meant that many seniors have lost ground because their conservative investment portfolios have often produced returns well below the current inflation rate.
This economic phenomenon serves as an important reminder that you can't necessarily predict what might affect your retirement savings -- but you can rest assured that Social Security benefits will increase when prices rise. This makes it a very secure source of income for seniors.
Although Social Security is definitely not enough to live on, maximizing your guaranteed inflation-protected monthly payments is certainly a smart move. If your savings don't go as far as planned due to rising prices, having extra money in your monthly Social Security check could really come in handy.
Is a delayed claim right for you?
While there are undoubtedly advantages to having the biggest monthly Social Security check possible, you must consider that you'll give up years of income to max out your payment amount. If you wait until 70, you pass up all the funds you'd have received from Social Security that you were eligible for between the age of 62 and when you actually make your claim.
Most people do end up better off waiting. Lifespans have gotten longer since the Social Security benefits formula was created, so odds are you'll live more than long enough to break even for forgone benefits. If you were the higher-earning spouse, increasing your monthly check due to delay will also give your spouse larger survivor benefits.
But there are limited circumstances -- such as passing away early with no spouse -- when a delayed claim is the wrong choice. For the most part, though, it's smart to maximize your inflation-protected income by delaying it to get the largest possible Social Security payments. Not doing that is definitely something you could come to regret.
