Most personal finance experts recommend waiting as long as necessary to claim Social Security in order to qualify for the largest possible benefit. For most, that means applying for retirement benefits at age 70.
While 70 is, statistically speaking, the optimal age to claim for the majority of retirees, it doesn't mean there are no downsides to waiting that long before taking Social Security. In some instances, waiting until 70 could even be detrimental to your finances and your ability to enjoy your retirement.
Here's the unfortunate truth about claiming Social Security at age 70.
Image source: Getty Images.
You're taking a risk
If you have the freedom and financial flexibility to claim your Social Security benefits at any age, then you'll have to make a calculated bet on when you should claim. While Social Security is designed to pay out an equal amount in lifetime benefits for the average person, regardless of when they claim, you probably don't fit the average. You might live much longer than the average person, or you might not.
If you live to an average age or longer, you'll likely benefit from delaying benefits until 70, according to various studies. One from United Income in 2019, for example, estimates 57% of retirees would maximize their wealth by waiting until 70 to claim Social Security benefits. Note that's far from a certainty, and many retirees don't live long enough to get the most out of that strategy.
Regardless, determining the exact optimal age to claim your Social Security benefits would require knowing exactly when you'll pass away. Since that's impossible to know, you can only make a best guess based on your lifestyle, family health history, and other factors. There will be times when those who delay their benefits based on a careful consideration of their life expectancy still end up with less in lifetime benefits.
You might be waiting for nothing
Social Security doesn't max out at age 70 for everyone. Anyone claiming spousal or survivor benefits will receive their maximum retirement benefit when they reach full retirement age. Those born in 1954 or earlier reached full retirement age at 66. The age increases by 2 months for each year you were born after 1954 before maxing out at age 67 for those born in 1960 or later.
Spousal benefits are equal to one-half of your spouse's primary insurance amount. That's the amount they'd claim at their full retirement age. While spousal benefits are reduced if you claim early, you won't receive delayed retirement benefits by waiting beyond your full retirement age. Even if you aren't eligible for spousal benefits when you reach full retirement age (because your partner hasn't claimed yet), it still probably doesn't make sense to delay taking your personal benefit.
Survivor benefits are equal to up to 100% of the deceased spouse's benefit prior to their death. If the deceased hadn't started collecting benefits, it's equal to up to 100% of their eligible benefit at death or the amount they'd be eligible for at full retirement age, whichever is higher. Again, there's no benefit to the surviving spouse in delaying beyond their full retirement age.
You'll be responsible for health insurance
You become eligible for Medicare upon turning 65. And if you're no longer working and receiving health insurance through your employer, it behooves you to enroll in the government medical insurance program. Most retirees automatically enroll in the program, since they're already collecting Social Security at age 65. But if you're planning to delay until 70, you'll need to enroll manually.
What's more, you'll be responsible for paying Medicare premiums out of your own budget. The Social Security Administration will deduct Medicare Part B premiums from your monthly benefits check automatically. But if you don't have a Social Security check, there's nothing to deduct your premiums from.
Medicare Part B premiums start at $174.70 in 2024, but they climb much higher if your income exceeds $103,000 as an individual or $206,000 for married couples. If you aren't budgeting for Medicare premiums, you may be in for an unpleasant surprise when the bill comes due.
If you plan appropriately, waiting until 70 to claim Social Security can work out well, but you need to understand the downsides before you decide it's for you.
