January 18, 2022

Is it still smart to delay social benefits?

As you prepare for retirement, one of the biggest decisions you will need to make is the age at which you want to start claiming Social Security benefits.

The earliest you can apply for benefits is age 62, but delaying that age means you’ll receive bigger checks each month.

In the past, most experts recommended postponing benefits until age 70 to collect the highest monthly payments. But is that still the right move for most retirees? Here’s what you need to know.

Two elderly people walking outside and smiling

Image source: Getty Images.

The plea for deferring benefits

The age you apply for Social Security is a personal decision and will ultimately depend on your unique situation. That said, in some cases it may be wise to defer benefits.

The best reason to consider deferring benefits is that it will increase your monthly income. By waiting until age 70 to claim benefits, you could receive up to 32% more per month than if you were with your full retirement age (FR). That can add up to hundreds of dollars a month, which can go a long way if money is tight in retirement.

Let’s say you have an FRA of 67 years old and by claiming at that age you will receive $1,500 per month. If you claimed at 62, your benefit would be reduced by 30%, leaving you with $1,050 per month. However, wait until the age of 70 to apply, then you will receive a 24% bonus, which works out to a total of $1,860 per month.

Keep in mind that, in theory, your total benefit should be about the same throughout your life, regardless of the age you file. By claiming earlier, each check will be smaller, but you will have collected more of it over the course of your life. If you defer distributions, you won’t get as many checks, but every check is bigger. However, if your goal is to monthly income, deferring benefits can be a smart move.

Why it might be better to claim early

While deferring benefits may be a good decision for some people, there are plenty of reasons to make a claim earlier.

For example, you have more time to enjoy your retirement. You don’t necessarily have to retiring and applying for benefits at the same time, but often go hand in hand. Not everyone wants to wait until their 70s to retire, and by claiming earlier you can jump-start retirement while still young and healthy.

Claiming benefits earlier can be especially smart if you have health problems or have reasons to believe you will have a shorter-than-average lifespan. Again, you should theoretically receive the same amount throughout your life no matter when you claim. However, these calculations are based on an average service life. If you have health issues, you may be able to collect more in total if you claim earlier.

After all, life is unpredictable and you never know what curveballs it might throw at you. If you plan to postpone the payment, but then have health problems, for example, you may regret having waited so long to claim.

What age should you claim?

Before filing a claim, consider factors such as your financial situation, your health, and how you plan to spend your retirement.

If you have a… robust pension fund and you want to actively retire, for example, it may be wise to make a claim as early as possible. On the other hand, if increasing your monthly income is critical, consider deferring payments to earn bigger checks.

There are no right or wrong answers when it comes to choosing an age to file for Social Security. But weighing all your options and taking into account your unique situation will make it easier to file at the right age for you.

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