The Unfortunate Truth About Claiming Social Security at Age 70

If you want to get the biggest possible Social Security benefit, you have to wait until age 70, and personal finance experts do often recommend waiting until that age to claim. Several studies suggest that's the age when the average retiree will maximize their lifetime benefit from the program.

However, delaying until age 70 comes with serious downsides too, and it doesn't make sense for everyone to wait that long. Here's the unfortunate truth about claiming Social Security at age 70.

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You're taking a risk

As mentioned, studies show the average retiree will collect more in Social Security benefits over their lifetime if they delay until age 70. While they'll forego benefit checks in their sixties, the larger amount they'll receive in their 70s and beyond will eventually catch up and overtake the amount they'd receive from claiming early. But the person waiting to claim at age 70 must live into their 80s before their cumulative benefits overtake what they would have received from the program by claiming earlier.

But you're probably not average. You might live longer than average; you might live shorter. There's no way to know for certain, but you can make a good guess. If you have reason to suspect you'll live a shorter-than-average life due to family history, personal health issues, or other reasons, it might be wise to claim benefits earlier rather than waiting.

You may leave less for your heirs

While you might maximize your lifetime income from Social Security by waiting until age 70, you could end up with less wealth to pass onto your heirs. Unlike your investment accounts and retirement savings, Social Security benefits don't pass on to your next of kin.

If you wait to start collecting Social Security until age 70, you may have to draw down your retirement accounts faster in your 60s. That puts a lot of pressure on your accounts to perform well for those few years while you're taking larger withdrawals.

A poor sequence of returns could leave your retirement balances substantially lower, if not depleted, by the time the years of good returns show up. At that point, you'll be able to get by with the help of Social Security, but you might not have a whole lot left to give to your loved ones.

Again, it all comes down to risk. There are ways to mitigate that risk in your portfolio with smart asset allocation, but it comes at the cost of expected returns. Waiting until age 70 and using appropriate asset allocation in your 60s should lead to higher and more stable overall cash flow during retirement, but it can come with the cost of leaving less for your heirs (on average).

You may have other factors to consider

A couple can often increase their total expected lifetime benefits if the lower-earning partner claims well before age 70. That's because Social Security offers special benefits for couples.

The first one to consider is spousal benefits, which offer the lower-earning spouse the right to receive up to one-half of the amount the higher-earning spouse would receive at their full retirement age. That could be more than what they'd receive based on their own earnings record. But unlike personal benefits, spousal benefits max out at full retirement age, or between 66 and 67.

The second one to consider is survivor benefits. These allow a widow or widower to receive the same amount in benefits that their partner was receiving before their passing. Thus, couples need to consider their joint life expectancies when deciding when to claim for the higher-earning spouse.

This often tilts the odds even more heavily toward waiting until age 70 for the higher-earning spouse. On the other hand, the lower-earning spouse can claim much earlier, perhaps even at age 62 since their Social Security income will have less of an impact on the couple's joint lifetime benefits.

The math gets a lot more complicated when discussing Social Security claiming strategies for couples. It may be worth sitting down with a professional to discuss your options and how they could impact the financial factors you value you most -- whether it's maximizing Social Security, leaving more to your heirs, or making sure your income in retirement remains as stable as possible. Waiting until age 70 isn't always the right answer.

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