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Should you access Social Security benefits as soon as possible or wait to try to maximize your monthly benefit? Everyone’s situation is slightly different, but there are really compelling reasons to delay your benefits.
Let’s take a look at the top three reasons to delay receiving your Social Security benefits until age 70.
1. You have a high life expectancy
Your life expectancy has a huge implication for this decision. The two main components to consider are:
- Your current state of health.
- The longevity of your family.
If you’re in excellent health and your family has a life history well past the 80s or 90s, it probably makes sense to max out your monthly benefits by waiting until age 70 to apply for Social Security.
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The average break-even point for waiting until age 70 to collect benefits is age 81 (assuming a full retirement age of 67). The break-even point is the age it will take you to live to make the wait worthwhile.
In other words, as long as you plan to live beyond age 81, you will receive more total benefits. Larger but fewer checks will trump smaller but more numerous checks you will receive if you claimed earlier.
This is also important because your health costs after 80 are likely to be higher, so the extra income could make a big difference.
2. You plan to continue working
Many Americans plan to continue working beyond the usual retirement age. A 2021 survey by Cision found that nearly 33% of American seniors plan to continue working into their 70s.
As life expectancies continue to rise, many more Americans are likely to plan to work well into their 60s. In this case, it makes perfect sense to delay taking Social Security benefits until age 70, because your benefits could be penalized by continuing to work.
If you have not reached full retirement age, the Social Security Administration deducts $1 for every $2 of annual income you earn above $19,560. The threshold is $51,960 if you reach full retirement age that year, and the deduction is $1 for every $3 of income. Plus, you could pay higher taxes on your Social Security benefits since your provisional income will be higher while you’re working.
While sometimes it might be a good idea to take Social Security while you’re still employed, generally speaking, you’re better off waiting until you’re fully retired or at the very least earning less than $19,560 to claim your benefits.
3. You don’t need the extra income
In my opinion, the #1 reason to take Social Security benefits early is because you need income. But if you don’t need that extra income to continue living comfortably, it’s probably best to delay getting your benefits.
If you’ve planned your retirement adequately, you’ll likely have enough monthly income from your retirement accounts like your 401(k), pension, or Roth IRA to cover your expenses and desired lifestyle.
If so, you should almost certainly wait until age 70 to maximize your monthly benefits (assuming you have a long life expectancy). After all, you could get nearly 60% more money a month while you wait (assuming full retirement age is $1,500, the benefit at age 62 would be 30% or 1 $050. The benefit at age 70 would be 120% or $1,800 (i.e. $1,050/$1,800 = 58%).
As your life slows down, this extra monthly income will provide you with a security blanket and peace of mind so you can focus on the things that are most important to you, instead of worrying about finances. .
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