New York, NY – When it comes to deciding on the best time to claim Social Security benefits, there are many factors to consider. With an eight-year window from ages 62 to 70 for eligibility, the decision can be daunting. Delaying benefits can lead to increased payments over time, but it also means missing out on early payments.
Recent research has shed light on the advantages of delaying Social Security claims, especially for high earners. A study focusing on individuals born in 1959 with an average income of $100,000 highlighted the significant impact of waiting to claim benefits.
The research analyzed the present value of Social Security benefits based on various scenarios and estimated mortality rates. The results showed a substantial difference in expected benefits for healthy males and females, as well as average earners.
The Social Security benefits formula aims to balance out lifetime benefits regardless of when they are claimed. Early filing penalties reduce standard benefits for early claims, while delayed retirement credits increase benefits for late claims. However, the formula may no longer achieve its intended purpose, as demonstrated by the significant disparities in benefits shown in the research.
For example, claim benefits at 62 instead of 70 could result in an $87,926 decrease for the average male, while the average female could see a $132,202 increase in benefits over their lifetime by delaying their claim. The disparity becomes even more pronounced for healthy individuals, with potential benefits reaching up to $179,999 more for a healthy woman and $154,821 more for a healthy man who waits until age 70.
Although these findings relate primarily to high earners, the majority of retirees may benefit from delaying their Social Security claim. While there are exceptions, such as lower-earning spouses or individuals in poor health, in most cases, waiting to claim benefits is advantageous.
Ultimately, delaying Social Security benefits can potentially result in tens or even hundreds of thousands of dollars in additional value from the program. By carefully considering individual circumstances and weighing the options available, retirees can make informed decisions to maximize their benefits through delayed claims.