The Unfortunate Truth About Claiming Social Security At Age 70

Most personal finance and retirement experts recommend waiting until age 70 to claim Social Security benefits. The primary reason for that rule of thumb is because the average individual will maximize their lifetime benefits by delaying Social Security. It also comes with a few additional tax-planning benefits for wealthier households.

But there are still some drawbacks to waiting until you're past your 60s to start collecting Social Security. These unfortunate truths shed light on some of the realities average American retirees might face in their claiming decision.

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You (and your spouse) might be able to receive more in lifetime benefits if you file earlier

There's always the chance you won't live long enough to make the most of your decision to delay Social Security until age 70. However, most individuals in average or better health can expect to get more out of Social Security by delaying until they are 70.

Things might change when you factor in a spouse and your total household income. That's because you need to consider spousal benefits and survivor benefits. Spousal benefits can be worth up to half of what your spouse would collect at full retirement age . They max out when you reach your full retirement age. In that case, it might make more sense to claim benefits when you maximize your spousal benefits by filing well before age 70.

When you consider survivor benefits, it might make sense for you to claim as early as age 62. Survivor benefits ensure a lower-earning surviving spouse can receive the higher amount the deceased spouse received. So, if the low-earning spouse claims at age 62 and the high-earning spouse waits until 70, they could end up with more in benefits over their combined expected lifespans depending on whether or when the higher-earning spouse passes away.

While claiming strategies are generally cut-and-dried for individuals, they become much more complex when you add a spouse.

You might leave less for your heirs

While waiting until 70 results in a larger monthly benefits check once you start receiving Social Security, you can't pass that check onto your heirs. Meanwhile, you'll have to lean more heavily on your retirement investments (which are inheritable) to make ends meet in your 60s. Drawing down your portfolio early could result in less money to give to your heirs when you do pass away.

Some aggressive investors may decide to collect benefits earlier in the hopes of out-investing the growth of their Social Security benefits. For each dollar of your monthly check, that's one less dollar you have to withdraw from your investment portfolio. And if the market performs in line with its historical averages, you may very well end up with more money in your investment accounts than you would if you waited to max out your Social Security benefits later.

A fair warning to those considering this strategy: It's not without risks. The stock market doesn't go up in a straight line. A poor sequence of returns will leave you with less to give to your heirs. By comparison, the value of delaying your Social Security benefits is both very predictable and a relatively strong return compared to other low-risk investments.

You'll need to pick up the tab for Medicare premiums

Most people who stop working and enroll in Medicare don't have to think too much about Medicare Part B premiums. That's because the Social Security Administration will automatically deduct what you owe from your monthly check when you enroll. But if you enroll in Medicare while delaying your Social Security benefits, you'll have to pay your premiums out of pocket.

Note that you're still paying for Medicare either way. It's just a matter of paying from your own bank account versus receiving a smaller Social Security check every month.

For 2024, most people will pay $174.70 per month for Medicare Part B premiums, but they can climb all the way up to $594 per month depending on your income. If you're delaying Social Security until age 70, you need to be sure you're accounting for those premiums in your budget.

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