One of the advantages of Social Security is the flexibility it offers in choosing when to claim benefits. You can enroll in the program when you’re between 62 and 70 years old. However, your monthly benefit will reach its highest point based on your earnings history only when you attain the full retirement age (FRA). If you were born in 1960 or after, your full retirement age (FRA) is 67.
You can also delay filing for Social Security beyond your FRA to receive a higher monthly benefit. Technically, there is no fixed deadline for signing up, so you can file as late as you wish. However, it is generally advised not to delay your claim beyond age 70 because there are no further financial incentives beyond that point, even though it is still possible to sign up later.
If you want to receive the highest monthly benefit from Social Security, it might be worth considering filing at age 70. However, there are two potential risks associated with this strategy.
Firstly, there is a chance that you may not live long enough to benefit financially from this decision over your lifetime. While filing at age 70 results in a higher monthly benefit, it does not guarantee a higher lifetime benefit. If you have a shorter life expectancy, you may receive less total Social Security income by claiming at age 70 compared to your FRA.
Let’s say your FRA benefit is $2,000 per month. Delaying your claim until age 70 would increase it to $2,480 monthly. However, if you were to pass away at age 78, you would accumulate approximately $26,000 less in Social Security income throughout your lifetime by waiting until age 70 instead of claiming at your FRA of 67.
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Secondly, it is important to consider the possibility that you may be unable to wait until age 70 to claim Social Security. There are circumstances, such as job loss or health issues, that might prompt you to retire earlier than you planned. Relocation to a new area could also present challenges in finding full-time employment. If you have relied on a higher monthly Social Security benefit at age 70 as a means of compensating for limited retirement savings, this strategy may not work out favorably if you are forced to claim Social Security at age 65 without a substantial nest egg.
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It may be a smart choice for some individuals to apply for Social Security at the age of 70, but it is important to be aware of the potential risks involved. Carefully consider these potential pitfalls before choosing to avoid regret or finding yourself financially strained when you reach retirement age.