January 18, 2022

Planning to claim Social Security at 70? It can’t work

The decision to postpone Social Security is not an easy one. After all, it’s hard to sit still and wait for a large amount of money that you know you are entitled to. But if you wait to claim Social Security until age 70, you will be rewarded in a very big way.

The earliest age you can claim Social Security 62, albeit at a reduced rate. And you are entitled to your full monthly benefit based on your income history when you full retirement age (FRA), either 66, 67 or somewhere in between, depending on when you were born.

For each month that you defer benefits after FRA, it will be increased by two-thirds of 1%. Do not apply for Social Security until: age 70, and you get a total boost of 24% to 32%, depending on your FRA.

A person behind a laptop holding a piece of paper and a pen.

Image source: Getty Images.

It’s a good idea to hold off on claiming Social Security if you think you’ll rely heavily on those benefits to pay your bills as a senior. And while you may not be doing the best job financing a… IRA or 401(k) plan, that may very well be the case. But while it’s a smart strategy to claim benefits at age 70, it’s also an option that may not work out in the end.

When the best-laid plans go wrong

A major reason seniors may defer Social Security benefits until age 70 is that they have access to another source of income in the meantime, which is a paycheck from work. But if you have to retire before age 70, you may have no choice but to apply for Social Security at a younger age.

Let’s say you plan to work until you’re 70 and then claim benefits — it’s not until you turn 65 that health problems force you to go back to part-time work. At that point, you may need to apply for benefits to stay afloat financially.

Likewise, your business may go out of business in your early 60s, and you may struggle to get a similar job later in life. If that situation forces you to stop working or be underemployed, you may not be able to wait to start claiming Social Security.

That’s why you shouldn’t necessarily count on being able to claim benefits at age 70 – even if you want to go that route. Instead, you could tell yourself to submit at an earlier age and plan around that. That may mean changing your spending as you get older. Or it might mean prioritizing your IRA or 401(k) so you have a more robust nest to fall back on in case your Social Security benefits turn out to be less generous than you’d like.

Of course, your plan to file for Social Security at age 70 may eventually come true. And if so, you’ll have a higher monthly benefit to look forward to for life. But it’s a good idea to remind yourself that your plan may not materialize — and figure out how to compensate for a lower benefit sooner rather than later.


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