May 10, 2015

Wait Till You're 70 To Take Social Security

Lets say you're a single 65 years old right now and you make $60,000 a year.  If you retire at age 66 then your social security benefit would be about $1530.   If you wait until you're 70 to claim social security then you would get $2159 a month.    Now clearly you get a lot more money if you delay till you're 70.    But most people don't want to wait and want to start getting their money as soon as possible and $1530 is quite a bit of money.    

Even with a very simple comparison waiting to age 70 nets you more money.    If you're 66 years old you're likely to live another 17-19 years.    Lets just say 18 years for simplicity.   So claiming at age 66 and living 18 years would get you about $330,000 total without counting for cost of living adjustments (COLA).    Claiming at 70 and living 14 years after that would net you $362,000.      This is roughly 10% more total from delaying benefits till age 70 versus taking them at normal retirement age of 66.

Waiting an extra 4 years give or take to claim your social security may be easier said than done.   Most people want to retire earlier than 70 and want an income to support themselves.  If you're in this situation then drawing down your IRA funds for a few years till you hit 70 can make sense.   There are a couple articles discussing that strategy from Kiplingers and USNews.

If you're married then the equation gets a lot more complicated.    Choosing when to take social security will depend on the benefits for each spouse and their ages. 

If you're in poor health or have a history of low life expectancy in your family then taking social security earlier can make good sense.   That may seem morbid but it is what it is.


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