Only 8% of Social Security Recipients Set Themselves Up for the Maximum Monthly Benefit. Should You?

Social Security serves as an important income source for millions of retired Americans. And there's a pretty easy way to set yourself up with a more generous monthly benefit for life.

All you have to do is delay your Social Security claim beyond full retirement age, which is 67 if you were born in 1960 or later. For each year you postpone your claim, up until age 70, your monthly benefit gets an 8% boost.

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But perhaps surprisingly, an overwhelming majority of Social Security recipients don't plan to delay their claims. A recent Schroders survey found that only 8% of respondents intend to wait until age 70 to sign up for benefits.

For some people, not holding off on Social Security is a huge mistake. But it's important to figure out whether that holds true for you.

A personal choice based on personal factors

The upside of delaying Social Security is clear. If you claim Social Security at 70, you'll score the maximum monthly benefit you're entitled to based on your individual wage history.

But in waiting to take benefits, you run a risk -- ending up with less lifetime income from Social Security. That's because your higher monthly payments come at the cost of fewer individual payments. And you need to live a reasonably long life to not only break even, but come out ahead.

That's why it's important to consider the state of your health when deciding whether to delay Social Security or not. If your health is great, and you're likely to live a long life, then holding off on Social Security could put more money in your pocket all in than filing at an earlier age.

But the opposite holds true when your health is poor. In that case, you might lose out financially by claiming Social Security at 70, or at another point beyond full retirement age, despite getting a larger monthly paycheck. So you'll need to think carefully about whether you want to take that risk.

Think through your financial needs

In addition to considering your health, another thing to think about in the context of delaying Social Security is whether you actually have to. The median retirement savings balance among Americans aged 65 to 74 was just $200,000 as of 2022, according to data from the Federal Reserve. That's not a very large nest egg to fall back on.

If your savings look similar, then it's easy to make the case for delaying Social Security and growing those monthly benefits. But if you have $1.5 million in your IRA or 401(k) plan, then you may have plenty of money to cover your essential retirement expenses. And in that case, it could pay to claim Social Security sooner so you can enjoy your benefits during the earlier stages of retirement, when you may have more energy to do the things you've always dreamed of.

Clearly, there can be a big advantage to filing for Social Security at age 70. But there may a reason so few Americans plan to wait that long. So before you decide that holding off until age 70 makes sense for you, look at the big picture and make sure that's a wise decision.

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