The Power in Delaying Social Security

Clay Wood |

Social Security was designed to be an insurance plan. Depending on how much you pay in you get a guaranteed payment later in life to cover your basic needs if you run out of assets when you can no longer work. Of course, as a society we no longer use it that way. People now use it as the base they start with to retire and determine what they have in addition.

Too many people say “I’ve paid into the system for decades. It’s time the government paid me back” but you need to remember it is insurance and for most it is worthwhile to delay. If you can afford it. And if want to be prepared to live for a long time.

It is worth considering, if you believe there is a chance you may outlive your assets or that you will live a long life to delay your benefits. The cost of applying early is steep just as the benefit of delaying after normal retirement age can be lucrative.

If your Full Retirement Age is 67 and you take your benefits at age 62, then your benefit will be reduced by 30%. For every year you delay taking your Social Security after your Full Retirement age you get an additional 8% per year raise. You can see how filing early will impact you depending on the year you were born here.

Let’s look at an example of what the math says. If your Full Retirement Age benefit is $2,000 per month then at age 62 your benefit would be $1,400. If you wait until age 70 your benefit jumps to ~$2,500 per month. That is an increase of 79% additional benefit between age 62 and 70!

Based on the breakeven points, if you were to live until past age 77 but not to age 81 it would be beneficial to file at Full Retirement Age to get the most out of your Social Security. If you were to live past age 81 it would be beneficial to file at age 70 to get the most out of your Social Security.

The math is not the only factor to consider. Deciding to claim your Social Security benefits is a complex and personal decision that is different for every family, and individual.

Sign in to your online Social Security account to find out your standard benefit amount. Set up an account if you haven’t already.

-Clay Wood-