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3 Reasons It's Dumb to Take Social Security Benefits at 70

Americans who are eligible for Social Security retirement benefits can choose to start collecting their monthly benefit at any time between ages 62 and 70, and "full retirement age" is 66 to 67 years old, depending on the year in which you were born. Most Americans -- 88% of men and 89% of women -- claim their benefits at or before full retirement age.

Only about 4% of Americans wait until age 70 to claim their benefit, or about one in every 25 senior citizens. While there are some good reasons Americans might want to wait, it certainly doesn't make sense for everyone. Here are some of the good reasons for waiting until age 70, and three reasons waiting as long as possible before claiming could be the wrong move for you.

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The good reasons to take Social Security at 70

Although most Americans don't wait until age 70 to take Social Security benefits, there are certainly some good reasons for doing so. Just to name a few, it can be smart to wait if:

  • You're in excellent health or have a family history of longevity.
  • You want to increase the amount of survivors' benefits a spouse or child could potentially get.
  • You plan to work past full retirement age and don't need the income yet.
  • You don't have enough retirement savings yet, so you want to increase your eventual income stream and have more time to save.

Having said that, there are a few reasons waiting might be a bad idea. Obviously, if you're no longer working need your Social Security benefit to cover your day-to-day expenses, it doesn't make sense to wait. In addition to the obvious reasons for taking Social Security before 70, here are three less obvious bad reasons to wait as long as possible.

1. You think you'll get more money by waiting

It's no big secret that if you file for Social Security before your full retirement age, your benefit will be lower, and if you wait, your benefit will be higher than it otherwise would have been.

However, it's not well known that the reason for this is so that the average American receives the same inflation-adjusted amount of Social Security benefits during his or her lifetime. In other words, based on the average life expectancy, if someone claims Social Security at 65 instead of waiting until 70, the additional five years' worth of benefits from ages 65 through 69 should offset the higher monthly check that person would receive for waiting.

Now, as I mentioned in the "good reasons" section, if you suspect that you'll live significantly longer than the average person, it could be a smart reason to wait. However, if you consider yourself to be in average health with an average life expectancy, it simply doesn't make sense to wait to claim benefits just because "you'll get more money out of the system."

2. You're still working, and don't want your benefit reduced

Many retirees incorrectly believe that if they're still working and earn above a certain amount, their Social Security retirement benefit will be reduced until they leave their job. This concept is known as the Social Security earnings test, and many Americans don't understand it well.

Specifically, the earnings test can result in a benefit reduction, but only for Americans who claim Social Security before reaching full retirement age. If you're at full retirement age or above, you are free to collect your entire Social Security retirement benefit even if you're still working, and regardless of how much you earn.

Therefore, if you've already reached your full retirement age and you could use the additional income from Social Security, go ahead and apply. You'll receive 100% of the monthly benefit to which you're entitled, no matter how big your paychecks are.

3. Your spouse is entitled to a benefit on your work record

This one has to do with Social Security spousal benefits. In a nutshell, if your spouse either didn't work or earned comparatively little throughout his or her career, a spousal benefit could provide that person with retirement income of as much as half of your benefit at full retirement age. In other words, if your full retirement benefit is $1,500 per month, your spouse could be entitled to receive up to $750 per month at full retirement age, regardless of his or her own work record.

Here's one caveat to be aware of when it comes to waiting until age 70 to claim your benefit: While you receive a benefit increase for waiting beyond your full retirement age, your spouse does not. A spousal benefit can be reduced for filing early, but there's no increase for delaying a spousal benefit.

For this reason, it often doesn't make good financial sense to delay your own Social Security retirement benefit beyond your spouse's full retirement age if he or she is entitled to a benefit based on your work record.

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