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I delayed claiming Social Security benefits until age 70. This was not an easy decision, but one that I was comfortable with. I am uncomfortable with the fact that most media sources state that delaying claiming Social Security until age 70 is the best option for the majority of American workers.
If delayed claiming is such a great deal, why do only about 4% to 9% of Americans actually wait until age 70 to collect Social Security? Are the other 91% of Americans ignorant of this strategy, or is there some better process?
Here’s the blog for the 91% of Americans who don’t wait until age 70 and are shamed by the media for their decision.
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According to the Journal of Financial Planning: In December 2022, sixty-four percent (64%) of retired workers who were receiving Social Security benefits chose to begin receiving benefits before their full retirement age. For those who initiated benefits in 2022, the most popular retirement age was the earliest possible age, 62, with 27 percent choosing this option. Only 10 percent were 70 years old.
For many people, the reason is very simple! These retirees need every available dollar, and cannot afford to wait until age 70 to claim increased Social Security benefits.
Table one illustrates some undeniable facts. This table illustrates the initial benefits at different ages for a worker with a full retirement age of 67 with a PIA (primary insurance amount) of $1000.
Social Security accounts increase at a rate of 7 percent each year from age 62 to 66, and then at 8 percent a year until age 70. Americans who begin claiming Social Security earlier than full retirement age receive reduced benefits for life. Americans who delay Social Security until age 70 will receive larger Social Security benefits.
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Full Retirement and Age 62 Benefit By Year Of Birth
| Year of Birth 1. | Full (normal) Retirement Age | Months between age 62 and full retirement age 2. | At Age 62 3. | |||
|---|---|---|---|---|---|---|
| A $1000 retirement benefit would be reduced to | The retirement benefit is reduced by 4. | A $500 spouse’s benefit would be reduced to | The spouse’s benefit is reduced by 5. | |||
| 1943-1954 | 66 | 48 | $750 | 25.00% | $350 | 30.00% |
| 1955 | 66 and 2 months | 50 | $741 | 25.83% | $345 | 30.83% |
| 1956 | 66 and 4 months | 52 | $733 | 26.67% | $341 | 31.67% |
| 1957 | 66 and 6 months | 54 | $725 | 27.50% | $337 | 32.50% |
| 1958 | 66 and 8 months | 56 | $716 | 28.33% | $333 | 33.33% |
| 1959 | 66 and 10 months | 58 | $708 | 29.17% | $329 | 34.17% |
| 1960 and later | 67 | 60 | $700 | 30.00% | $325 | 35.00% |
| If you were born on January 1st, you should refer to the previous year.If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month. If you were born on January 1st, we figure your benefit (and your full retirement age) as if your birthday was in December of the previous year.You must be at least 62 for the entire month to receive benefits.Percentages are approximate due to rounding.The maximum benefit for the spouse is 50% of the benefit the worker would receive at full retirement age. The percentage reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding. Source: Social Security Administration | ||||||
An illustrated example would be to consider full retirement benefits as a cake.
People who claim Social Security benefits earlier receive a cake with pieces missing.
People who claim Social Security at full retirement age receive a whole cake.
People who delay claiming Social Security benefits until age 70 receive a larger cake.
The question becomes, how much cake will it take to make you happy?
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In Figure 1, the three starting ages give approximately the same present value for death ages around 84 or 85.
The Social Security Administration’s 2023 actuarial life table, based on 2020 data, gives a life expectancy of 81 years for a 62-year-old male and 84 years for a 62-year-old female. Americans who claim later will have to wait longer to benefit from the late claiming strategy. Currently, this crossover occurs at age 84 or age 85. After age 85, waiting until age 70 to begin receiving benefits generates more money!
Using the same cake analogy, early claimers receive more smaller cakes than later claimers, who receive larger cakes. At some point (generally around age 84 or 85), the total volume of all of the smaller cakes received will equal the volume of all the larger cakes received later.
If that person is still around at age 84 or 85, then they win because they receive a bigger cake for the rest of their life.
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Figure 2 shows that generating a 4 percent real return means a person delaying benefits to age 70 has to live to 89 for it to be beneficial to delay the start of benefits.
However, 77 percent of 67-year-old males die before 89, as do 65 percent of 67-year-old females. Age 70 is not the most financially rewarding age to initiate benefits unless an individual has a low discount rate and/or is confident they will live several years past their life expectancy.
Using the previous cake analogy, because you’re a faithful customer, every year the bakery gives you a little bit larger cake. The cake will increase in size each year, but the amount of increase will differ yearly. The amount of change in cake size represents the return on invested Social Security funds. Because the size of the cakes increases every year, the person who starts to receive larger cakes at age 70 will now have to wait until age 89 for the total volume of the larger cakes received to surpass the volume of all of the smaller cakes received.
Since the average life expectancy for a 62-year-old male is 81 years and 84 years for a 62-year-old female, this doesn’t seem like a great deal.
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After evaluating these examples, does waiting until age 70 to claim Social Security benefits still make sense?
Waiting until age 70 to claim Social Security can be a powerful strategy, but it is not the best choice for everyone.
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Here are the main advantages and disadvantages.
Pros of Waiting Until Age 70
1. Higher Monthly Benefit for Life For each year you delay beyond your full retirement age (FRA), your benefit grows by approximately 8% per year through delayed retirement credits. For someone with a full retirement age of 67:
- Claim at 62: about 70% of full benefit
- Claim at 67: 100% of full benefit
- Claim at 70: about 124% of full benefit
That higher payment continues for the rest of your life.
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2. Greater Protection Against Longevity Risk If you live into your 80s, 90s, or beyond, the larger benefit can significantly increase your lifetime Social Security income.
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3. Larger Annual Cost-of-Living Adjustments (COLAs) COLAs are applied as a percentage of your benefit. A larger starting benefit means larger dollar increases over time.
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4. Better Survivor Benefits For married couples, the surviving spouse generally receives the larger of the two benefits. Delaying the higher earner’s benefit can provide greater financial security for the surviving spouse.
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5. Reduced Dependence on Investments A larger guaranteed, inflation-adjusted income stream can reduce the need to withdraw from retirement savings during market downturns.
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Cons of Waiting Until Age 70
1. You Receive Fewer Years of Payments By delaying, you give up several years of benefits that could have been collected between ages 62 and 70.
2. Break-Even Age May Be in Your Late 70s or Early 80s Many people do not come out ahead financially until approximately age 78–82, depending on their circumstances and assumptions.
3. Health Concerns If you have serious health issues or a shorter-than-average life expectancy, claiming earlier may result in greater lifetime benefits.
4. Requires Other Sources of Income You’ll need enough savings, pension income, employment income, or other resources to cover expenses while delaying benefits.
5. Opportunity Cost Some retirees prefer to claim earlier and invest the benefits. Depending on investment returns and longevity, that strategy may outperform delaying.
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Who Often Benefits Most From Waiting?
Waiting until 70 is often attractive for:
- Healthy retirees with a family history of longevity
- Married couples where one spouse earned substantially more
- Individuals concerned about outliving their assets
- Retirees with sufficient savings to bridge the gap
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Who Might Consider Claiming Earlier?
Claiming before 70 may make sense for:
- Those with significant health concerns
- Individuals who need the income immediately
- Single retirees with shorter life expectancy expectations
- People who place a high value on receiving benefits sooner
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Final Thoughts
If you’re healthy, have adequate retirement savings, and expect to live into your mid-80s or beyond, delaying Social Security until age 70 is often one of the best ways to increase guaranteed lifetime retirement income.
For many retirees, Social Security is effectively an inflation-adjusted annuity backed by the U.S. government, and waiting until 70 maximizes that benefit.
Examples earlier in this blog show a crossover age of 89. This occurs when invested Social Security benefits receive a 4% return. The problem with that strategy is that it is very seldom implemented. Most retirees who claim Social Security benefits early do so because they need the money to live on.
Whether or not you want to quibble about an increase of 7% or 8% between ages 62 and 70, I enjoy the fact that those benefit increases are guaranteed.
The projected crossover date could be much lower if the anticipated return is much lower, or negative.
With the guaranteed increases in benefits that occur with waiting until claiming, there is no risk. The increases in benefits are clearly stated and implemented.
My dad passed away at age 70, but my mother was almost 101 when she passed away. I plan to play the long game and want to win the Social Security “cake” war. I am now receiving larger cakes and hope to do so for many more years.
Larry Swedroe, director of research at Buckingham Strategic Wealth and Buckingham Strategic Partners, offered interesting insights several years ago. He said many people are concerned about waiting until age 70 to claim Social Security, and then dying before they hit the crossover age. These retirees feel they would effectively be leaving money on the table. His answer to these retirees is twofold:
- Retirees should be more concerned about the effects of inflation and running out of money than the crossover date and leaving money on the table.
- When the principal recipient of a married couple passes away, the spouse continues to receive the higher benefit for life.
Mr. Swedroe felt these reasons validated waiting until age 70 to claim Social Security benefits.
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