What No One Tells You About Social Security Timing
Every year that you wait to receive your Social Security payments will increase the size of the benefit check, so it makes sense that a retiree may want to wait until age 70 in order to maximize the benefit.
But while common advice is to hold off until age 70 if you can, doing so isn’t practical for all retirees. And in some cases, doing so can cost you.
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What is the benefit of delaying Social Security?
First, it’s important to understand how waiting to take your Social Security benefits can benefit you. Your Social Security income grows by 8% each year that you defer it. It’s a low-risk, inflation-adjusted income source that offers you guaranteed payments.
You’ll also have to pay taxes on up to 85% of your Social Security benefits if your income exceeds certain thresholds. If you’re still working when you claim benefits, your paychecks could put you above that threshold.
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Why delaying for Social Security can cost you
You can begin receiving Social Security benefits when you turn age 62. While waiting until age 70 means larger checks, that’s only the case if you live long enough to reap those benefits. If you pass away at age 69, for example, you wouldn’t have received any Social Security. Even if you live into your early 70s, you’d miss out on some income.
Of course, we can’t know what will happen in the future. But it's important to consider the potential cost of holding off — and any history of poor health in your family — when determining whether or not you should claim Social Security.
Consider your spousal benefits
Spousal benefits come into play if one spouse earned more income than the other. The spouse who earned less money can receive up to 50% of their partner’s full retirement benefit if that figure is higher than their own.
Some couples decide that the lower-earning partner should claim benefits as soon as possible to ensure extra income, while the other spouse waits until turning age 70. This decision will depend on factors like your total earnings, nest egg and living expenses, and other factors. This “split strategy” can make sense for some couples, even if having both spouses wait could mean larger checks for both later in life.
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Determine what’s right for you
Listening to popular advice — like waiting until age 70 to receive Social Security — doesn’t always make sense. Personal finance is, as the name implies, personal.
The best timing for claiming Social Security depends on your financial situation, and you shouldn’t assume that hitting age 62 or age 70 is when you should start. Consider factors like your health, spousal benefits and taxes to determine when to start receiving your checks. If you’re unsure, consider speaking with a financial advisor.