Delaying your claim for Social Security benefits means giving up years of income that could be available to you. You can start your checks as soon as age 62, but waiting as long as you can until age 70 can result in an increased monthly benefit for each year you delay.
If you're trying to decide what claiming strategy is best for you, there are four compelling reasons why you should consider waiting as long as you can.
Image source: Getty Images.
1. To maximize the potential for higher lifetime benefits
Social Security is designed to theoretically equalize the amount of benefits a retiree gets, regardless of what age they first claim them.
The idea is that anyone who files before their full retirement age (FRA) will see their standard benefit reduced by early filing penalties. Although they'll receive more checks over the course of their lifetime, each one won't be for as large of an amount.
On the other hand, anyone who waits past their FRA will receive fewer checks but will be rewarded with delayed retirement credits that raise the amount of their checks. So each of the checks they do get will be for a higher amount.
However, the system was designed based on actuarial projections of life expectancies when Social Security was created -- and although life expectancies have gotten longer, the system of early filing penalties and delayed retirement credits hasn't changed.
A small majority of retirees now outlive their life expectancies and end up with more lifetime income if they wait until 70 to claim benefits. So if you want to play the odds of maxing out your monthly income, delaying is the best choice.
2. To bring in more income each month if you're worried about running short later
Many people worry about their retirement savings lasting throughout their lifetimes. If this is a concern, it makes sense to wait as long as possible to get the largest Social Security check you can. Social Security benefits are guaranteed to last for life, so you'll always be able to count on this income coming in.
Living on Social Security alone is really difficult, as these benefits only replace around 40% of preretirement income. They just aren't meant to be your sole source of funds as a senior. But if you fear that you may come to rely on them to provide the bulk of your take-home pay late in life, it just makes sense to do everything you can to maximize your benefit -- which means delaying the start of your checks.
3. To protect your spouse if you're the higher earner
If you are the higher earner, delaying your benefits claim as long as possible can help ensure that your spouse is better provided for after you are gone.
When one spouse passes away, the surviving spouse is allowed to claim survivors benefits. These equal the higher of the two benefits either party was bringing into the household.
If you claimed your benefits early and shrunk the amount of income Social Security is providing you, you'll also end up reducing the survivor benefits your spouse will receive. The loss of a spouse can be financially devastating even under the best of circumstances. If you've left your widow(er) with a smaller benefit, you'll only make things worse.
4. To avoid losing benefits due to working while collecting them
If you want to work while receiving Social Security benefits, you may want to wait until at least full retirement age to claim them. If you earn too much money from your job before FRA, you lose some of your benefits temporarily.
The SSA withholds entire checks when you lose benefits due to a big paycheck. Eventually, you're credited back the early filing penalties for the months you didn't get payments. This happens when your benefit is recalculated to account for that at full retirement age. But breaking even for missed benefits can take years, and there's often little point to claiming benefits early if you'll only end up not getting most of the checks anyway.
If any or all of these four reasons apply to you, you should strongly consider a delayed Social Security benefits claim. It could make all the difference in your financial security as a retiree.
