Deciding when to claim Social Security benefits is a critical factor when planning for retirement, because the age you claim will affect how much you receive each month in benefits for the rest of your life.
The most popular age to begin claiming benefits is 62 years old, with 42% of men and 48% of women claiming at this age, according to the Center for Retirement Research at Boston College. The vast majority of Americans don’t delay benefits as long as they could, with only 2% of men and 4% of women waiting until age 70 or later to begin claiming.
That could be a missed opportunity, though, because there are a few significant advantages to delaying benefits. And there are three situations, in particular, in which it may be a good idea to consider waiting as long as you can to begin claiming.
1. You don’t have much in savings
Retirement can be incredibly expensive, and yet many Americans’ savings are falling short. Around 80% of workers have less than $250,000 in savings and investments, a report from the Employee Benefit Research Institute revealed, and more than one-quarter have less than $1,000 stashed away.
If your retirement savings are limited, you’ll need another source of income to make ends meet. By delaying Social Security benefits, you’ll receive fatter checks each month. In fact, by waiting until age 70 to begin claiming, you can receive up to 32% more than your benefit amount at full retirement age. That can result in hundreds of dollars more per month than if you’d claimed earlier, which will go a long way if you can’t depend on your savings in retirement.
2. You expect to live a long lifespan
When calculating benefits, the Social Security Administration assumes retirees will live an average lifespan — which is between 80 and 85 years old for today’s 65-year-old men and women, respectively.
This means that, in theory, it shouldn’t matter when you claim benefits as long as you live an average lifespan. If you claim early, you’ll receive smaller checks but more of them. If you delay benefits, your payments will be bigger, but you won’t collect as many over a lifetime.
However, if you have reason to believe you’ll live a significantly longer-than-average lifespan, you could come out ahead by delaying benefits. Those bigger checks will add up over time, and if you think you could live into your 90s or beyond, you could potentially collect tens of thousands additional dollars over a lifetime by waiting longer to claim.
3. You want to continue working
You don’t have to begin claiming Social Security benefits as soon as you retire, but many people choose to go that route. If you plan to continue working into your late 60s or 70s, it may be a good idea to hold off on claiming benefits until you’re ready to stop working entirely.
If you were to continue working after you claim benefits, your monthly checks could be temporarily reduced depending on how much you’re earning. So if you claim benefits early but then decide to continue working, your checks may be smaller than you expect — at least in the short term. If you’re planning to work as long as you can, you may be better off if you delay claiming to earn those bigger checks.
Keep in mind, however, that you won’t see any additional boosts in your benefits by waiting beyond age 70 to claim. You’re not required to begin claiming at age 70, but because there’s no financial incentive to delay past that age, it’s wise to start claiming even if you’re still working.
Choosing when to begin claiming Social Security is a personal decision that will depend on your unique situation, but it’s important to think carefully before you file for benefits. Not everyone will be able to delay claiming benefits, but in some cases, it can be one of the best retirement moves you could make.
