Are you preparing for your retirement and not sure what you should do about collecting your Social Security benefits? If so, you are not alone in wondering when the best time is to file to maximize your lifetime benefits. But there are several things that can factor into your decision making. As a Registered Social Security Analyst (RSSA®), I am more than qualified to help people and couples on an individual basis. And when you consider I am also a Registered Financial Consultant (RFC®) I can assist you in planning much more than your Social Security benefits.
Waiting Until Age 70
If you are in your mid to late 60s, it is recommended that you wait until age 70 to begin collecting your Social Security benefits and enjoy about a 24% increase over the benefits you would have gotten at a full retirement age of 67. And that increase in benefits is for life meaning you will collect a much larger monthly check by waiting an extra three years. And here is a little-known fact about Social Security that works in our favor in 2019 and later. The actuary tables that the Social Security Administration uses were last updated in 1983 meaning life expectancies we lower then than they are today. In other words, we are living longer than we did back in 1983 when the tables were last updated.
A major second reason why waiting until age 70 makes financial sense is people seem to be healthier in our late 60s than ever before, and people are working longer as a rule. And by doing so you are giving yourself a guaranteed 8% raise every year for three years between ages 67 and 70. In today’s extremely low-interest-rate environment, a guaranteed rate by the US government that cannot be touched outside of the Social Security plan. Yes, you may make a better return in the stock market, but the bull market will end at some point, and the returns you make there are nowhere near being a guaranteed return for life.
Why Wait Until Age 70
If you are single and working, it makes perfect sense to delay your benefits until age 70 and get that 24% increase in benefits for life. If you are married and the higher earner, it also makes sense to delay your benefits as the higher your wages, the higher your overall benefits will be with the increase you will receive by delaying your benefits. Now, for married couples where one spouse earns considerably less it may make more sense for them to file for their benefits at their full retirement age. These benefits will be based on their lifetime wages or could be based on the higher-earning wages of their spouse in the form of spousal benefits.
Regardless of if you should wait until age 70 to apply for your Social Security benefits, I highly recommend that you at least wait until your full retirement age. For most of us, that is either 66 or 67 under the current system. Yes, we are eligible to start collecting our benefits at age 62, but the reverse of waiting happens in these instances. Your Social Security benefits will be reduced about 6% a year for every year you collect before your full retirement age. That means if you are like me, a Gen X, or a later generation, you will lose about 30% of your full retirement benefits for the remainder of your life.
No, I am not making a blanket statement that you should always wait until your full retirement age or age 70 to begin collecting your benefits because everyone’s situation is unique, and there are many factors that should go into making your decision as to when you begin collecting your benefits. For some people they may have a family history of poor health in their later years. Or you may have current health issues that may influence your decision as to when to collect your benefits. To get a complete picture, seek out the assistance of an RFC® or an RSSA® for further assistance.
The Second-Best Age to File
If you make it past your full retirement age of 66 or 67 and do not wish to wait until age 70, what is the second-best age to file? That is age 69 to get a 16% increase in your lifetime benefits. Delaying a year does not make much sense, but it is better than no increase at all. And I still strongly recommend that everyone wait until their full retirement age if at all possible to avoid any lifetime decreases in your benefits.
But again, everyone’s situation and reasons for filing for their Social Security benefits are unique to them, and everything needs to be considered. Social Security is an extremely complex system and at times can be extremely confusing to maneuver through. Before you file for your benefits get the advice from a fee-only Registered Financial Consultant (RFC®) or get a Social Security analysis from a Registered Social Security Analysts (RSSA®).
As always, if you have any questions for comments, please feel free to contact me directly. And for the month of December I am offering a 15% discount on Social Security analysis, including a comprehensive report that details the best filing scenario for you and your spouse.
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