Why Delaying Social Security Until 70 Is a Bad Idea

Social Security is a critical source of retirement income for many Americans. For those who have paid into the system for decades, the decision of when to begin claiming Social Security benefits can be a difficult one. One popular strategy is to delay claiming benefits until age 70 in order to maximize the amount of income received over the course of retirement. However, a growing body of research suggests that delaying Social Security benefits may not always be the best option. In this post, we’ll explore the arguments for taking Social Security as early as possible and explain why it may be the better choice for some retirees.

Be sure to check out our retirement video where we discuss The Best Age To Claim Social Security

Argument 1: Social Security is designed to provide a safety net, not to maximize wealth.

Social Security was designed to provide a safety net for Americans who are no longer able to work. It is intended to provide a basic level of income to help retirees meet their basic needs, such as housing, food, and healthcare. While delaying benefits can result in a higher monthly payment, it may not be necessary for those who have sufficient savings and retirement income from other sources.

In fact, according to a study by the Center for Retirement Research at Boston College, delaying Social Security benefits until age 70 may not be the best strategy for those with limited savings. For those who have saved less than $100,000, the study found that taking benefits as early as possible may be the better choice.

Argument 2: Life expectancy plays a crucial role in the decision to delay benefits.

Delaying Social Security benefits may be a good strategy for those who expect to live well into their 80s or 90s. However, for those with a shorter life expectancy, taking benefits as early as possible may be the better choice.

According to the Social Security Administration, the average life expectancy for a 65-year-old American is around 84 years old. If you expect to live significantly shorter than this, taking benefits as early as possible may be the better option.

Furthermore, research by the Society of Actuaries suggests that healthy Americans are living longer than ever before, but those who are less healthy may not see the same longevity gains. For those with a shorter life expectancy, delaying Social Security benefits may mean missing out on income they may not live long enough to receive.

Argument 3: Inflation and taxes can erode the value of delayed benefits.

Delaying Social Security benefits can result in a higher monthly payment, but this increased income may not keep pace with inflation. While Social Security benefits are adjusted each year for inflation, the cost-of-living adjustments may not be enough to keep up with rising expenses.

Furthermore, the taxes paid on Social Security benefits may also erode the value of delaying benefits. According to a study by the Center for Retirement Research, retirees who delay benefits until age 70 may pay up to 15% more in taxes than those who claim benefits earlier.

Argument 4: The opportunity cost of delaying benefits can be significant.

Delaying Social Security benefits means missing out on income during the delay period. For those who have limited savings or need additional income to meet their retirement needs, the opportunity cost of delaying benefits can be significant.

Furthermore, the decision to delay benefits can impact other retirement decisions, such as when to retire or how much to withdraw from retirement savings. For those who delay benefits, they may need to withdraw more from savings to meet their income needs during the delay period, which can impact their long-term financial security.

Conclusion:

While delaying Social Security benefits may be a good strategy for some retirees, it may not be the best choice for everyone. Social Security is designed to provide a safety net for retirees, and the decision to delay benefits should be based on individual circumstances, including life expectancy, retirement savings, and income needs.

For those with limited savings, a shorter life expectancy, or who need additional income to meet their retirement needs, taking benefits as early as possible may be the better choice. Additionally, inflation, taxes, and the opportunity cost of delaying benefits should also be considered when making the decision of when to claim Social Security.

It’s important to note that the decision of when to claim Social Security is a personal one and should be based on individual circumstances. For those who are unsure about the best course of action, it’s important to seek advice from a financial advisor who can help evaluate your specific situation and provide guidance.

Ultimately, the decision of when to claim Social Security benefits is an important one that can have a significant impact on your retirement income. By considering all the factors involved and making an informed decision, you can maximize your Social Security benefits and ensure a financially secure retirement.

Our firm can help put together a detailed retirement plan for you that will include a thorough analysis of your Social Security benefits. We will help you make an informed decision on when it may be best for you to claim your Social Security.

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