Last Modified on September 10, 2019

Social Security benefits are undoubtedly one of the steadiest and most stable sources of income in retirement. But it is important to understand that these benefits work in combination with other sources of income, dividends, and interests that you earn. They are also taxable. The most alarming aspect of Social Security that most people are not aware of is that they are based on mortality tables that were last updated in 1983. The statistics on life expectancies have made a major shift since then. With the advancement in medicine and technology, people today live longer. This is why even though you can start claiming your Social Security benefits from the age of 62 if we put the present scheme of things into context, it makes sense to delay it till you hit 70. 

Someone rightly said, “All good things come to those who wait.” Here are some reasons why you should delay claiming your Social Security benefits. 

6 Reasons you should delay Claiming Social Security Benefits

1. The interest earned is higher

Up to the age of 70, every year that you delay claiming Social Security benefits, you earn an interest of 8%. This is a lot more than traditional savings bonds that provide 1- 2 % interest, and even high-yielding stocks that provide 4-5 % interest. You should think of Social Security as an investment. If you calculate an interest of 8% for 8 years (ages 62 – 70), you can increase your benefits by a substantial amount. 

2. Benefits increase with inflation

Inflation is a positive integrator when it comes to Social Security benefits. With a rise in other prices, Social Security benefits increase too. The increased benefits that come with inflation are over and above the 8% that you get if you delay claiming Social Security. Social Security benefits have been increased by 2.8 % for the Cost of Living Adjustment (COLA) in 2019. This has been the largest increase since 2012 and is likely to increase in the future years. 

3. Women live longer

While life is highly unpredictable and there is no certainty to this claim, it is still a scientific fact that women generally outlive men. Keeping this statistic in mind, as a woman, you should look for ways to increase your post-retirement income or learn to spread it out evenly so that you don’t face any trouble later. This is especially important for single, divorced or widowed women, who don’t have a spousal income to bank on. Delaying Social Security to the age of 70 can increase your total lifetime benefits by 18%. 

4. One spouse can save up on increased benefits

Retirement may come with impending house or health expenses, which can require you to claim Social Security at an early stage. However, as a married couple, you should consider both your incomes and benefits before deciding to claim the benefits. If the wage gap between you and spouse is quite substantial, it is advisable for the one with the lesser income to claim their social security first. Delaying the benefits of the higher income earner, can be an added advantage for both the partners.

5. Benefits can be claimed by the surviving spouse

Many people assume that if they don’t use up their Social Security benefits, they will be wasted. However, in the case of married couples, if one spouse is deceased, the surviving spouse can continue to claim their benefits. This can be a good way to make sure that your loved ones are well provided for when you are not around. 

6. The benefits reduce if you have a job

With the 70s being touted as the new 60s, more and more people are continuing to work even in their 60s. If you choose to work after the age of 62 and have another source of income, your Social Security benefits will be negatively affected. The government can cut $ 1 from your Social Security for every $ 2 or $ 3 that you earn from your job. 

To sum it up

Picking the right age to claim Social Security benefits is very subjective. Of course, if you have a financial emergency then claiming the benefits is a good idea instead of building up your debt in terms of credit card bills and personal loans.

Note: Your family history and genetics also play a very important role in estimating the number of years of your post-retirement life. Another important factor that plays a crucial role in deciding when you should claim your benefits is the full retirement age. The full retirement age in 2019 is 67 for those who were born in 1960 or later. For those who were born in 1937 or before, the full retirement age is 65. Always remember that even though you are eligible to claim Social Security at the age of 62, you are entitled to claim a full 100 % only after attaining the full retirement age. 

Do you need help in making the most of Social Security benefits? Consult financial advisors to discuss the best time to claim the benefits based on your current age and financial status.