Here’s why claiming Social Security at age 70 doesn’t work for some retirees

It is an unfortunate but well-known fact that many older Americans begin their retirement years with little or no savings. As of 2022, the median retirement plan balance for seniors between the ages of 65 and 74 was just $200,000, the Federal Reserve reported. And while a strong stock market may have pushed this number up since that data was collected, the reality is that many of today’s retirees have minimal savings given their life expectancy. .

Because of this, many people entering retirement will rely heavily on Social Security to cover their expenses. And those without savings are often encouraged to squeeze as much money as possible out of the program.

For you, that might mean delaying claiming Social Security until age 70. And that’s not a bad strategy in theory. However, in reality, here’s why it doesn’t work:

When lifetime income is insufficient

Delaying your Social Security benefits past full retirement age increases your monthly benefits over your lifetime. If your full retirement age is 67 (this applies to people born after 1960), you have the opportunity to increase your monthly Social Security pay by 24% by enrolling at age 70. This is appealing to you. I’m shy about saving money.

But delaying Social Security also comes with risks. You might be able to get more money every month, but you don’t know if that will happen on a lifetime basis. That’s because you need to live long enough to make up for the years you could have received a monthly benefit but didn’t.

Now we often hear advice that you should rely on your health as an indicator of when to claim Social Security. And the logic tends to be that if you’re in good health, it makes sense to delay enrolling in Social Security in order to get a higher monthly check. If you are in good health, you are more likely to live long enough to pay off for delaying your application.

However, even healthy people can experience worsening symptoms. You may get injured or get sick, and your lifespan may be shorter than expected. So, regardless of your situation, delaying Social Security means taking a gamble. The question is whether the promise of a higher monthly salary is worth the risk.

That’s for you to decide.

How much extra money do you need?

If you’re not too sure whether claiming Social Security at age 70 is the right choice, you may want to ask yourself how much you need that increased benefit. If you have some If you have savings, you might tell yourself that when you reach full retirement age, you’ll enroll in Social Security and forego the increase. If you don’t have any savings, you may come to a different decision.

Of course, for some seniors, the choice to delay Social Security until age 70 works out beautifully. But before you put your registration on hold, you need to ask yourself whether you’re willing to risk a lifetime lack of income. If you don’t want to take the risk, it’s best to apply for Social Security when you reach retirement age and agree to the decision.