Key Points
As you near your retirement age, you must start seriously thinking about when you’re going to claim your Social Security benefits. These benefits will be an important source of income, and your decision about when to start them could have a huge effect on both your monthly and lifetime income.
Smart retirees will look at data to guide them in their decision, and the data is clear on what claiming age is best for almost all seniors. However, this common recommendation doesn’t apply to older Americans claiming a specific type of benefit.
This is when the data says you should claim Social Security
First things first. For the vast majority of retirees, the best age to start Society Security benefits is age 70.
That’s based on multiple studies, including those from the National Bureau of Economic Research and United Income.
Both studies demonstrate that the majority of retirees will collect more lifetime income if they delay, with the NBER data showing that over 90% of workers should wait until age 70 to claim benefits. Since only 10.2% do, the median household sees its discretionary spending reduced by $182,370 due to claiming earlier than optimal.
A delayed claim until age 70 increases monthly benefits by making it possible to avoid penalties for early filing, as well as by allowing you to maximize delayed retirement credits. A standard $2,000 benefit, which would have shrunk to $1,400 if claimed at 62 instead of at a full retirement age (FRA) of 67, would become $2,480 per month at 70 instead.
Waiting to claim also increases lifetime benefits because most people live longer than it takes to break even for a delayed claim. The system of early filing penalties and delayed retirement credits was put in place to equalize benefits for early and late claimers when lifespans were shorter, so now most people do better than break even if they delay.
So, those who want to maximize this source of guaranteed inflation-adjusted income should typically delay their claim.
Waiting doesn’t pay off in one situation
While a delay until 70 is the right choice for most people, there’s one situation where you absolutely don’t want to wait until 70: if you’re collecting spousal benefits instead. If you didn’t work much during your career or if your spouse earned substantially more than you, your spousal benefits may be worth more than your own retirement benefits.
If you claim your spousal benefits at your own FRA, you should be eligible for up to 50% of your spouse’s primary insurance amount (standard benefit). Now, you could shrink this if you start your checks early. But you can’t increase it if you delay your claim beyond your FRA. So, waiting until 70 provides no extra benefits.
The rules for spousal benefits do require you to wait until your spouse has claimed their own retirement benefits. But as long as they have and you’re eligible to start collecting your payments, there’s no reason to delay until 70 in this situation. Doing so would just mean leaving money on the table, so it shouldn’t be part of your retirement plans.
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