The monthly benefit you're entitled to from Social Security is based on your lifetime wages -- specifically, the amount of money you earn during your 35 most profitable years in the workforce. But your filing age will also determine how much money Social Security pays you on a monthly basis.
You're entitled to your complete monthly Social Security benefit based on your earnings history at full retirement age, or FRA. That age is 67 for anyone born in 1960 or beyond.
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But you have a range of choices when it comes to filing for Social Security. You can claim benefits as early as age 62, but signing up before reaching FRA will leave you with a reduced monthly benefit for life.
You can also delay your Social Security claim beyond FRA. For each year you do, up until age 70, your monthly benefit gets an 8% boost.
That boost will remain in effect on a permanent basis. So you may be inspired to delay your claim until your 70th birthday to score that higher monthly payday.
But while it's easy to see why a Social Security filing at age 70 might seem like a smart move, there's a risk you take when you go this route. And in light of it, you may want to consider an earlier filing age.
Will you live long enough to come out ahead financially?
While a Social Security filing at age 70 will result in a higher monthly benefit, it may not result in a higher lifetime benefit. And that's an important distinction to make.
Let's say you're entitled to a monthly benefit of $2,000 at an FRA of 67, but you wait until 70 to sign up for Social Security. That will raise your monthly payments to $2,480.
That might seem like a great deal at first. But it also means you're missing out on three years of collecting a monthly income from Social Security. And if you don't live long enough, you might end up with less total income from the program by filing at age 70 instead of your FRA of 67.
In fact, your break-even age in this filing scenario is 82 1/2, so if you live beyond that point, then filing for Social Security at age 70 will result in you getting more money from the program. But are you sure you'll live that long? That's the big question.
And to show you what might happen if you don't live long enough, let's say you delay your Social Security filing until age 70 and wind up passing away at age 76. By postponing your claim beyond FRA, you'll end up with $37,440 less Social Security income in the course of your lifetime.
That's why it's so important to recognize the downside of filing for Social Security at age 70. The idea of a higher monthly benefit for life might seem enticing, and understandably so. But waiting until age 70 means taking a big chance. If you'd rather not risk it, then an earlier filing may be a better decision for you.
