The Top 5 Reasons to Claim Social Security at 70

Social Security retirement benefits become available to you at age 62, but claiming them as soon as you are eligible is often a mistake. In fact, for a significant number of retirees, the best age to claim benefits is actually eight full years later at the age of 70.

Waiting eight years to start getting money you are entitled to may not seem like the right choice, but there are actually a number of good reasons to delay. To help you decide if putting off your claim is right for you, here are the top five reasons why claiming Social Security at 70 may be your best move.

1. You can maximize your monthly guaranteed income

Every retiree who worked for long enough is entitled to a standard retirement benefit, or primary insurance amount (PIA). Your PIA is available at your full retirement age, which used to be 65 but which has gradually been pushed back and is now 67 for anyone born in 1960 or after.  It’s calculated based on average wages in your 35 highest-earning years.

If you start benefits before FRA, the result is a reduction in monthly income as early-filing penalties reduce your PIA. On the flip side, delaying benefits until 70 means getting more monthly income — and often substantially more. If your FRA is 67, a delay until 70 would increase benefits by 24%, so a $1,900 monthly benefit would grow to a $2,356 monthly payment.

Since Social Security is probably your only source of guaranteed income that will 100% last for life and that has built-in adjustments for inflation, it just makes sense to try to maximize your monthly retirement benefits.

2. Odds are you’ll end up with more lifetime benefits

There’s another big reason to wait until 70 as well. Doing so could mean you don’t just get more money each month — you collect a larger total amount of combined Social Security benefits over the course of your entire life.

See, the system of early filing penalties and delayed retirement credits was created a long time ago with the goal of equalizing benefits for early and late claimers. Working with actuaries to estimate life expectancy, officials designed the plan so that those who got started late would get around the same amount in the end as those who started early, because they would get larger benefits for enough years to break even.

Now, however, people are living longer than when the original program was designed. As a result, studies have shown that around 7 in 10 retirees end up with more lifetime income due to a delayed claim. So if you’re hoping to collect the most Social Security possible after paying into the system for all of your working life, a delay can pay off.

3. You can increase the amount of survivor benefits if you were the higher-earning spouse

When one spouse dies, the other can qualify for survivor benefits. Basically, this means they can keep their own retirement benefit if it is larger than their deceased spouse’s benefit. Alternatively, they can get survivor benefits equal to 100% of what their deceased spouse was collecting.

If you are a higher earner in your household, it pays to put off your benefits claim until 70 to increase your check amount as much as possible. By doing that, you end up maximizing the survivor benefits your widow(er) collects, making it easier for them to make ends meet.

4. You could reduce your tax bill

Reducing your tax bill is another potential reason why a Social Security benefits claim at 70 could make good sense. See, you may have to pay taxes on up to 85% of benefits depending on how high your provisional income is. Provisional income is half of Social Security benefits, plus all taxable income and some limited non-taxable income, such as MUNI bond interest.

If you are earning a good amount of money at a younger age, either because you’re doing some part-time work or because you’re taking a lot of money out of your retirement plan, then you may be in a higher tax bracket and more likely to be taxed on Social Security. As you age, your savings may dwindle and your work opportunities dry up, though your taxable income and tax rate may fall.

This could mean you’re less likely to have to pay tax on your Social Security, and if you’re taxed, you’d pay a lower rate.

5. You’ll have more money later in life when you need it

Finally, it’s worth considering that most people tend to spend the majority of their money early on in retirement, due to traveling and enjoying hobbies, and then again later in retirement because their healthcare spending needs increase. Unfortunately, as you get older and your nest egg starts to dwindle, this could become a serious problem as your medical care costs rise.

If you have maxed out your monthly Social Security benefit, you’re going to have more money available to you to cover these crucial healthcare expenses later. This can be especially important since you probably aren’t going to be going back to work at that time.

For all of these reasons, a claim at 70 seems like it makes good sense. Of course, everyone’s situation is different, and you need to make the decision that’s best for you. A financial advisor can help you figure out what that is if you aren’t sure if waiting until your 70th birthday is the best choice for your needs.

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