The No. 1 Reason to Claim Social Security at Age 70
With inflation rates not seen since the 1980s, retirees and pre-retirees alike haven’t been this concerned about rising prices in some time. Combine this with a falling stock market and an increasing scarcity of defined benefit pension plans, and Social Security stands to play an even larger role in the financial plans of retired Americans. Consequently, waiting until age 70 to claim Social Security benefits — if it’s feasible for you — can be a smart financial choice for a variety of reasons.
Here, we’ll dig into why inflation is the No. 1 reason it makes a lot of sense to wait until age 70 to file for Social Security benefits.
Inflation is a problem for retirees
Without overstating the obvious, inflation is a major issue for retirees living on fixed incomes. It slowly eats away at your purchasing power as every dollar buys fewer goods and services than it did even a year ago. Those who can still generate some sort of additional income (even if they’ve retired from their main job) can create a bit of a shield against rising prices, but not everyone finds themselves in such a position.
Exacerbating the issue are falling stock prices and a dearth of defined benefit pension plans across the retiree population. Retirees rightly hesitate to draw down their retirement accounts in this bear market.
Since this bout of inflation has lasted far longer than most government officials had anticipated, those who don’t have extra sources of income need to find longer-term solutions to the inflation problem.
Social Security’s role
The best way to think about Social Security as a part of your retirement plan is to treat it as a guaranteed income floor. In theory, Social Security will be there to provide a minimum level of income for the rest of your life. The longer you wait to take Social Security, the more you’ll get: By waiting until age 70 to claim benefits, you’ll receive 24% more from Social Security each month than you would have if you claimed benefits at full retirement age, which is between 66 and 67 years old.
In addition to a higher base insurance amount, you’ll also receive inflation adjustments, or cost-of-living adjustments (“COLAs”), for each year you wait. For 2023, retirees will receive an 8.7% increase in monthly benefits, though you’ll have to have been receiving benefits for at least a year to get the full COLA (otherwise, you’ll receive a prorated inflation adjustment). With a stock market that’s touched bear territory several times this year, taking guarantees where they’re available seems, at the least, a sensible way to act.
The reality is that very few other sources — if any — can provide a guaranteed income floor combined with annual inflation protection (even if imperfect) just by allowing enough time to pass.
With that in mind, waiting until 70 to start collecting benefits requires you to be in fairly good health. You’ll also need to find a way to bridge the gap financially if you retire from your primary career before 70. All of these considerations make it an important issue to discuss with your family and any dependents.
Inflation calls for creativity
Because Social Security plays a big role for many retirees, those approaching retirement may need to get creative during their 60s to boost their benefits from the program. The value of waiting until age 70, assuming all variables align, is increasing substantially — particularly given the wider economic landscape (including poor stock performance and higher borrowing costs). But in the end, the increase in the base benefit, along with the annual inflation adjustments, can make it a smart idea to wait until 70 before filing your claim.
Retiring comfortably is still possible, and many millions of people will do it. But to have a monthly check that covers as much of your living expenses as possible is ideal. Working even small amounts in your 60s can help you create enough of an income bridge to reach age 70, at which point you’d receive your maximum possible Social Security benefit for the rest of your life. While everyone’s circumstances vary, waiting to claim in the face of inflation can be a brilliant choice for many retirees.
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