If you want to maximize the chances you'll receive the most lifetime Social Security income, studies provide the answer on when you should claim benefits.
The optimum claiming age for most people is 70, according to a study called The Retirement Solution Hiding in Plain Sight. This study revealed that 57% of retirees would have more lifetime wealth as a result of a delayed claim, even though just 4% of seniors actually start their benefits at 70 right now. The fact that so many people make the suboptimal choice and claim benefits early actually costs retirees as a whole about $3.4 trillion in potential income they could have had if they waited.
These numbers are pretty compelling, but they should not actually convince you to claim Social Security at 70 in every situation. Here's why.
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Studies only tell part of the story
Although the odds are that starting Social Security benefits at 70 is going to result in more lifetime income, the fact is that 57% isn't 100%. For some retirees, an earlier claim actually does result in more lifetime income. You may be one of those retirees if you aren't in great health, probably won't outlive your life expectancy, and have no surviving spouse who would be dependent upon Social Security survivor benefits.
Even if you are among the majority likely to end up with more lifetime benefits if you claim at 70, this still doesn't mean you need to listen to that study. You may decide to claim Social Security earlier because:
- You want to retire sooner than 70, and you need Social Security benefits to make that happen.
- You'd rather get less money at a younger age when you're able to enjoy it more -- rather than wait to be a rich old retiree who may not have the health or stamina to travel at that time.
- You need to retire at a younger age than 70 for practical reasons and you'd run through your savings too quickly if you did not have Social Security benefits to supplement it.
These are all valid reasons to start your checks well ahead of 70 -- and even as young as 62 when you first become eligible for benefits.
The key is that you need to make an informed choice. You must know you are reducing your monthly benefits and potentially your lifetime benefits, and you need to be OK with that. You also must make sure you have other income sources since you can't live on Social Security alone -- especially if you have claimed your benefits ahead of schedule and reduced them.
If you're aware of the downsides of an early claim and still decide it makes good sense for you, then there's nothing wrong with moving forward with this plan despite what the studies might say.
Optimizing your lifetime benefits isn't all it's cracked up to be
While there's certainly an argument to be made that you should try to squeeze every dollar out of Social Security, the fact is that many people choose to make decisions in life all the time that don't optimize their finances. This ranges from taking a lower-paying job because you like it better to deciding to leave the workforce early, even if you could make a lot of money by staying on.
As long as your decision doesn't put you at risk of financial ruin, you need to consider life factors along with the financial data to make the Social Security choice that's right for you.
