Deciding when to begin claiming Social Security benefits is a critical consideration for many Americans approaching retirement, given that these payments often represent the primary source of income during those years. The age at which one elects to apply for benefits directly influences the monthly amount received, creating an incentive to strategize the optimal filing age carefully.
Some individuals, including those who have diligently saved outside of Social Security, view these benefits as supplementary income rather than essential funds for daily living expenses such as housing or food. Even so, ensuring that the Social Security claim is timed to extract maximum value remains important.
Social Security guarantees a steady monthly income for life, offering a degree of financial security that personal savings might not. This feature adds to the weight of the decision on when to commence benefit collection.
Understanding Social Security Claiming Ages
The earliest age at which a person can claim Social Security is 62. However, claiming benefits before reaching full retirement age results in a permanent reduction in monthly payments. For individuals born in 1960 or later, full retirement age is 67. Postponing claims beyond full retirement age increases monthly benefits by approximately 8% annually up to age 70.
Historically, delaying Social Security claims until age 70 has been advocated as the way to secure the highest monthly benefit. This strategy assumes recipients will live well beyond 70, maximizing the advantage of enhanced monthly payments over time.
Revisiting the Claim at 70 Strategy
New perspectives have challenged this conventional wisdom. Experience has shown that a person's health status at claim eligibility does not guarantee longevity, and therefore, the expected advantage from delay may be less certain than previously thought.
A case in point is a recent personal loss: an individual in seemingly excellent health, an avid marathon runner and practicing cardiologist up to his late seventies, passed away at age 78. This event underscored the unpredictability of lifespan, even among those who enjoy robust health.
Consequently, the assumption that delaying Social Security until 70 guarantees greater lifetime income is not universally valid. Mortality unpredictability introduces a risk that delaying benefits could result in receiving less total income than if benefits were claimed earlier.
Analyzing the Numbers
For illustrative purposes, consider an individual whose full retirement age benefit at 67 would be $2,000 per month. If they delay claiming until 70, the monthly benefit increases to $2,480. Assuming they live to age 82 and a half, total Social Security income would be $372,000 regardless of whether they claimed at 67 or 70.
However, if they pass away at 78, claiming at 67 yields $264,000 in total benefits, while claiming at 70 results in approximately $238,000—less overall income despite higher monthly payments.
In contrast, claiming benefits as early as 62 reduces monthly payments to $1,400. Yet, if the individual passes away at 78, the cumulative benefit totals around $269,000, which is higher than totals in both the 67 and 70 claim scenarios of this example.
This analysis reveals that earlier claiming can provide better total Social Security income, particularly if life expectancy is shorter than average.
Individual Considerations and Financial Context
The decision about when to claim Social Security benefits is highly individualized. For someone with significant personal savings—potentially rendering Social Security as supplementary income—the trade-offs might favor earlier claiming to ensure receipt of benefits over an uncertain lifespan.
Conversely, individuals with lower retirement savings may find that delaying benefits remains the preferable choice to maximize monthly income and financial stability.
Ultimately, personal health, anticipated longevity, savings reserves, and financial goals should all influence the timing of Social Security claims.
Conclusion
The conventional advice to delay claiming Social Security benefits until age 70 to maximize monthly checks is not a one-size-fits-all recommendation. Given the uncertainty of lifespan and individual financial circumstances, earlier claiming ages can sometimes result in greater cumulative benefits.
Those approaching retirement should carefully weigh their own health status, financial resources, and retirement needs when determining the optimal Social Security filing age, recognizing that unexpected life events can profoundly alter the expected benefits of a delayed claim.