The difficulty of filing for Social Security is that you are not limited to a single age by doing so. You are entitled to benefits already at the age of 62, and even if you technically do not have to submit within 70 years, there is no financial reason to wait past that point. As such, 70 is generally considered the last age to take advantage – but is that the right time for you?
Why archive for Social Security at 70?
Your monthly social security benefits are calculated based on how much you earned during your highest paid wages for 35 years, and you are entitled to full monthly benefits when you reach full retirement age. This age, depending on your year of birth, is either 66, 67 years or somewhere in between. Now, as mentioned earlier, you are allowed to apply for benefits before, but for every year you claim insurance before the full retirement age, your benefits will be reduced, and in most cases on a permanent, lifelong basis.
On the other hand, you also get the opportunity to defer benefits past full retirement age, increasing them by 8% for each year you hold. This incentive expires at age 70, but if you look at a full retirement age of 67 and you register at age 70 instead, you get a 24% increase in benefits that remain for the rest of your life.
Obviously, it's a pretty good incentive to file for Social Security at 70. But in some cases, it doesn't make sense to wait that long.
When 70 is the wrong age to register
Although demanding social security at 70 will increase your monthly benefits, it will not necessarily increase your lifetime – that is, the total you collect from Social Security all-in. The longer you live, the more submission of 70 makes sense. And even if you can't predict your own life expectancy, you can use health approaching retirement as a guide. If your health is terrible, you are generally better off entering social security early or on time. But if your health is good, and you have reason to believe that you will live a long life, it can pay off at age 70.
Suppose you are entitled to a monthly benefit of $ 1,500 at age 67. Waiting for 70 to claim Social Security will increase each monthly payment you receive to $ 1,860, but you will also collect 36 fewer payments in process. At that point, you have to live to the 82-1 / 2 age to be even – which means getting away with the same lifetime total, whether you sign up at 67 versus 70 – which means if you are not bad idea to count on living so long, to file for 70 years.
Another reason why you can claim Social Security before the age of 70? You've lost your job, can't find a new one and don't have enough savings to pay the bills. At that point, it's better to take benefits faster than collecting dangerous credit card debt to pay your living expenses.
Finally, you can have benefits earlier than 70 years if you are financially secure, but only want the money to travel or enjoy retirement when you are younger. For example, if you have more than enough savings, 65 years will pay your living expenses for 30 years or longer, but you want your social security income to fund a number of expensive trips, why not go for it? You've earned it, and you want more energy for that kind of thing at 65 than at 70.
That you get the choice of when to file for Social Security is in theory a good thing. Still, it's not an easy decision. If you are thinking about claiming benefits at 70, pay attention to your health and only wait as long as you think you have a decent life ahead of you. Otherwise, it may be worthwhile to accumulate a lower monthly benefit, but increase your chances of wasting a total lifetime of Social Security.