Seniors get choices when it comes to claiming Social Security. You can file for benefits as early as age 62. But signing up ahead of full retirement age (FRA) will result in a reduced benefit. FRA kicks in at 67 for anyone born in 1960 or later.
You also get the option to delay your Social Security filing past FRA. For each year you do, up until age 70, your benefits get a permanent 8% boost.
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In fact, you'll often hear that 70 is the latest age you can claim Social Security. In reality, you can sign up whenever you want starting at age 62. But there's no financial incentive to wait beyond 70.
Meanwhile, many seniors inevitably enter retirement with very limited savings. The average 60-something today, for example, only has $112,500 socked away, according to data from Northwestern Mutual.
That's not a lot of money at all in the course of what could be a decades-long retirement. So if you're in a similar boat, you may be inclined to claim Social Security at age 70 so you can snag a higher monthly benefit to compensate.
But while signing up for Social Security at age 70 is a smart choice for some people, it really only makes sense for those with a strong life expectancy. And if you have health issues going into retirement, then it could pay to claim Social Security much sooner.
When you stand to lose out on a lifetime basis
Claiming Social Security at age 70 will mean getting a higher benefit every month. The problem, however, is that you're waiting longer to first start getting that money. And if you don't end up living very long, you might end up with less lifetime Social Security income by virtue of signing up on your 70th birthday instead of an earlier date.
Let's say you're eligible for $2,000 a month from Social Security at an FRA of 67. Waiting until 70 will give you $2,480 a month, while filing at age 62 will shrink your monthly benefit to $1,400.
But let's say you only end up living until age 76. Here's the lifetime Social Security income you're looking at based on your filing age:
- 62-$235,200
- 67-$216,000
- 70-$178,560
Clearly, in this situation, filing for Social Security at 70 means denying yourself many thousands of dollars in total income. And so before you decide that you're going to sign up at age 70, you'll really need to assess your health and see if it warrants an earlier filing.
Of course, it's more than possible to start off retirement with great health and then have it decline after the fact. Similarly, you might enter retirement with poor health but see it improve thanks to a combination of medical intervention and lifestyle choices.
But for the most part, it pays to consider an earlier Social Security filing than age 70 if your health isn't wonderful going into retirement. It's not worth sacrificing lifetime income just to see a larger payment hit your bank account on a monthly basis.
