Once upon a time, the very first Social Security check was issued for a humble $22.54. Fast forward to today, and the stakes have significantly increased, with the average retirement benefit now at $1,827 per month. But did you know there’s a strategy that could substantially boost this amount? It’s all about timing.
Recent findings suggest that workers between the ages of 45 and 62 stand to gain considerably by holding off on claiming Social Security benefits until past age 65, and even more so if they can wait until age 70. At 70, benefits can leap by 76% compared to starting them at 62. Despite this hefty incentive, only a small fraction of workers harness this opportunity.
Economists like Larry Kotlikoff, alongside his colleagues, have crunched the numbers and found a striking median loss of $182,370 in potential lifetime spending for those who claim earlier. “The return on being patient with Social Security is enormous,” Kotlikoff advises.
So, why does patience pay off? Here’s the rundown: Social Security retirement benefits kick in from age 62 for those who’ve put in a decade of qualifying work. Yet, claiming early means smaller monthly checks. If you wait until your full retirement age (currently between 66 and 67), you’ll bag 100% of your earned benefits. Go beyond that, up to age 70, and you’re looking at an 8% boost per year.
Waiting also has practical perks. Reach at least age 65, and you’ll be eligible for Medicare, adding another layer of financial security. And for those who live longer than average, these increased benefits become even more valuable.
The advice is clear across the board: if you can, you should try everything to delay—tap into retirement savings, work a bit longer, or even downsize your home. Kotlikoff even boldly states, “You should beg, borrow and steal to avoid taking your benefits too early.”
But, of course, life isn’t one-size-fits-all. For those facing shorter life expectancies, claiming early might make sense. Yet even then, considering the potential survivor benefits for your spouse is crucial.
J.P. Morgan Asset Management echoes this sentiment, noting that while some circumstances may necessitate an earlier claim, the value of patience often prevails.
Indeed, for lower-income workers, waiting could be tough, but the rewards are proportionally greater, offering a larger share of pre-retirement earnings. Sharon Carson, a retirement strategist, reassures that the Social Security program is designed to give more back to those who earned less.
This sage advice could mean the difference between just getting by and truly enjoying your golden years. So before you decide when to claim your Social Security benefits, consider the long game—it might just be worth the wait.
