If you want to make the best use of your financial future, you need to make the right decision of when to claim your social security benefits.
Nearly half of all men and women claim their social security at age 62. Delaying your benefit even one year increases your monthly benefit by about 8%. If you claim at 66 rather than 62 you receive 33% more in monthly benefits. If at age 62 you would receive $1,000 per month, by delaying until age 66 your benefit would increase to $1,333 a month.
Some people may need the additional income at 62 especially if they cannot work. However, if you are still able to work, you might consider part-time employment to cover the additional social security you are delaying. It’s easier to get a full-time or part-time job when you are in your 60s than in your 70s or even 80s. Average life expectancies had been increasing before COVID-19 and having less income later in life because you claimed early could cause financial stress when you are without or have limited options. When you are in your 80s with a lower benefit you may wish you had delayed so you would have more income at that time.
According to CBS News’ Living Too Long is a Risk, the odds are about 1 in three that a 65-year-old male will live to age 90. For a 65-year-old woman, there is a 42% chance she will live to age 90. The odds are 31% that one member of the couple will live to age 95. To cover this longevity risk, the fear of outliving your money, you need to carefully consider your social security claiming options.
If you are able to do so, there are even greater benefits by delaying to age 70. Each year past your full retirement age (66 for those born before 1955) you receive an additional 8% in benefits for the greater of the rest of your life or your spouse’s life. The greater benefit for the couple would become the survivor benefit when one spouse dies. In other words, if you were the higher earner this benefit would continue for your life and your spouse’s life. You need to consider both your health and your spouse’s health when determining the optimal social security claiming age for your situation.
For example, if you would receive $1,000 at age 62, by delaying to 66 you would receive $1,333 at age 66 and by waiting to age 70, you would receive $1,760 per month. This represents a 76% increase over the amount at age 62. So consider your claiming decision carefully while you still have options.