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Delaying Social Security to Age 70 is Usually the Best Option

By Jane Young, CFP, EA

One of the biggest decisions that retirees face is when to start taking Social Security benefits.  The full Social Security retirement age for people under age 70 is between 66 and 67.  You are eligible for your full Social Security benefit at your full retirement age.  

You can start taking Social Security at age 62 but it may result in a reduction of up to 30% in benefits.   Additionally, if you receive benefits before your full retirement age, and you are still working, your benefits may be reduced.  If you make more than the annual Social Security earning limit of $21,210, your benefit will be reduced by $1 for every $2 over the limit. Alternately, if you delay taking benefits till age 70, your benefit will increase 8% a year from your full retirement age to age 70.

Statistically, you will receive the same total benefit whether you start taking benefits at age 62, 70, or any age between, if you live to the average Social Security life expectancy.  The decision on when to take Social Security would be easy if we only knew how long we will live.  A Social Security life expectancy calculator is available at www.ssa.gov.

In most cases it is beneficial to delay taking Social Security until age 70. However, there are a few situations where it may be advisable to take your benefit earlier.  The first is if you are in poor health and do not expect to reach the Social Security life expectancy.  However, if you are married and are the higher earning spouse, consider your combined life expectancy.  Your spouse may be entitled to a survivor benefit of 100% of your Social Security.

Another reason to take your benefit before 70 is if you truly need the money to cover living expenses and you do not have other assets to cover your needs.  The decision to start taking benefits is not set in stone, if things change you can always start taking your benefit.

Delaying your benefit until age 70 locks in a substantially higher benefit for the rest of your life. Additionally, the dollar value of your cost of living increases will be higher.   The percentage will be the same but it will be applied to a higher benefit.

An extensive study by Wade Pfau and Steve Parrish, published in the January 2023 Journal of Financial Planning, found that delaying Social Security can be framed as longevity insurance that helps to support the increasing costs associated with living a long life.  They found that the inflation adjusted lifetime benefits for a retiree and surviving spouse will be 77% larger for those who claim at 70 instead of 62.  At the very least, they found delaying Social Security while spending down other fixed -income assets had a better than even chance of improving financial security in retirement.