One must find out if living long enough to benefit from a delayed filing is guaranteed. The monthly Social Security benefit you receive is based on your lifetime earnings, specifically the income earned during your 35 most profitable years in the workforce. However, the age at which you file will also determine the monthly amount you receive from Social Security.
If you were born in 1960 or later, once you reach the full retirement age (FRA) of 67, you may be eligible for Social Security benefits based on your earnings history. Nevertheless, you have a range of options when it comes to filing for Social Security. You have the option to receive benefits at age 62, but this would mean a lower monthly benefit for the duration of your life.
Alternatively, you can delay filing for Social Security beyond FRA, and for each year you delay, up to age 70, your monthly benefit will increase by 8%. This boost will remain in effect permanently. Consequently, you may be tempted to wait until your 70th birthday to secure a higher monthly payment.
While it may initially appear wise to file for Social Security at age 70, this approach has a risk. It may be worth considering filing at an earlier age. One needs to consider if you live long enough to financially benefit from this strategy. While it is true that claiming Social Security benefits at age 70 will increase your monthly payment, it may not always result in a greater total benefit over your lifetime. This distinction is crucial.
Let’s assume that at FRA, which is 67 for you, you are entitled to a monthly benefit of $2,000. However, if you wait until age 70 to claim Social Security, your monthly payments will increase to $2,480.
At first glance, this may seem like an excellent deal. However, it also means forgoing three years of receiving monthly income from Social Security. If you do not live long enough, filing at age 70 instead of your FRA of 67 might result in a lower total income from the program.
In this filing scenario, your break-even age is 82 and a half. If you live past that point, filing for Social Security at age 70 will result in receiving more money from the program. But can you be certain that you will live that long? That is the crucial question.
To illustrate the potential outcome if you do not live long enough, let’s assume you postpone your Social Security filing until age 70 but pass away at age 76. By delaying your claim beyond FRA, you would miss out on $37,440 in Social Security income over your lifetime.
This highlights the importance of recognizing the downside of filing for Social Security at age 70. The allure of a higher monthly benefit for life is understandable. However, waiting until age 70 involves taking a significant gamble. If you would rather not risk it, an earlier filing may be a more prudent decision for you.