I’m Eligible for Social Security, But I’m Considering Waiting Until I’m 70. Is It Worth It?

Deciding when to start taking Social Security can be a financial planning challenge. It requires everyone to weigh their individual circumstances—their salary, their retirement savings and other investments, their expenses, how long they’re able to work, and more—to determine the best strategy.

A recent post on Reddit captured the dilemma perfectly. The user wrote:

“I am interested in people’s thoughts. It seems lots of people are advising to wait till age 70 to claim Social Security for the one that has the higher level of benefits. Particularly if the spouse will go for spousal benefits. Are you waiting to claim as late as possible? Are you withdrawing from your 401k/IRA, or … do you have an employer pension? Or are you claiming when you retire?”

This question resonates because when you take your Social Security benefits can affect your Social Security income for the rest of your life. While it’s a great idea to put off your claim for as long as possible so that you get the biggest monthly payment available, some people may not want or be able to do that. However, for many workers and retirees, delaying benefits is one of the most powerful long-term financial strategies available.

Waiting Until 70 Can Pay Off Big

Social Security is designed with built-in incentives for delaying your claim. While you can start collecting as early as age 62, doing so comes with a permanent reduction in the amount of your monthly benefit, often around 30% less than what you’d receive at your full retirement age (FRA), which is typically 67 if you were born in 1960 or later.

But the real magic happens between your FRA and age 70. This is when you have the greatest potential to increase your benefits.

For every year you delay past your FRA, Social Security awards Delayed Retirement Credits, which increase your benefit by up to 8% per year, depending on your birth year. That can translate to roughly 132% of your full benefit if you wait until age 70 rather than claim early at 62. Think of it as receiving a guaranteed return, something that’s increasingly difficult to achieve in low-risk investments.

Let’s say you’re about to retire, and your FRA benefit is $2,000 per month. There’s an 8% increase in benefits for every year you delay.

• If you claim at 62, you’d receive the lowest payment at about 70% of your full benefit, or $1,400 per month.
• If you claim at 67 (your FRA), you’d receive 100% of your benefit, or $2,000 per month.
• If you claim at 70, you’d receive the highest possible payment at about 124% of your full benefit, or $2,480 per month.

Basically, waiting from age 62 to age 70 increases your monthly Social Security income from $1,400 to $2,480, a difference of $1,080 per month for the rest of your life. Over a long retirement, that difference can translate into tens of thousands of dollars in additional income.

And because Social Security payments adjust for inflation, starting with a higher base amount means future cost-of-living adjustments compound on a larger number. Over many years, this can dramatically boost your lifetime income.

Social Security is the only source of income for many retirees, so waiting to claim isn’t always an option. If you’re considering delaying your claim, plan how to bridge the gap between early retirement and your delayed Social Security start date. Here are a few ideas.

• Use retirement savings, pensions, or annuity payments to cover expenses while waiting.
• Earn part-time income.
• Coordinate spousal benefits for household support.
• Reduce discretionary spending temporarily.

These strategies can help you maximize your future Social Security benefits as you maintain financial stability in the years before you start receiving your benefits.