Making the decision when to claim Social Security benefits is a complicated process that requires careful consideration. While there are advantages to claiming early at age 62 or waiting until age 70 for a larger check, many individuals find that waiting until their full retirement age strikes a balance; for those born in 1960 or later, the full retirement age is set at 67.
Claiming at age 67 comes with its downsides. One of the biggest risks is the uncertainty of whether one will live long enough to benefit from the higher payment amounts. Recent data from the Centers for Disease Control (CDC) shows that the average 60-year-old can expect to live until 82 years and eight months, with an increased life expectancy to 83 years and ten months at age 65.
To break even on the decision to delay benefits from age 62 until full retirement age, individuals generally need to live until around 78 years old. However, there is still a chance that a 62-year-old male has a 23% probability of not reaching that age, while the average 62-year-old female has a 13% chance, according to actuarial data used by the Social Security Administration.
While claiming at 67 tends to work out better for most people, it does mean reducing benefits compared to waiting until age 70. By delaying Social Security beyond full retirement age, monthly benefits increase by eight percentage points each year until age 70. A study conducted by United Income in 2019 found that 57% of retirees would accumulate more wealth throughout their lives if they waited until age 70 to claim Social Security.
However, there is an exception for those planning to collect benefits on someone else’s record, such as a spouse’s. In such cases, claiming before age 70 may be more advantageous. Regardless, for the majority of individuals, waiting until 70 is the better option compared to claiming at 67.
Furthermore, individuals need to consider the impact of their claiming strategy on their spouse’s survivor benefit. If a surviving widow or widower has not yet claimed Social Security before their partner’s death, they can receive up to 100% of their spouse’s benefit amount. However, if the deceased spouse had already claimed, the surviving spouse will only receive the same amount. Claiming at 67 reduces the maximum survivor’s benefit that the spouse could receive for the rest of their life.
Technically when it comes to supporting one’s spouse or family after passing away, waiting beyond age 67 typically proves to be more beneficial. Social Security claiming strategies should be well thought out, taking into account personal circumstances and the potential impact on lifetime wealth accumulation.