Claiming Social Security at 70 Is Risky. Here's Why.

The most recent Federal Reserve data on retirement savings points to a median $200,000 balance among Americans aged 65 to 74. Even the less representative average savings of people in that age group -- roughly $609,000 -- isn't so vast when you consider that it might need to last for 20 or 30 years.

That's why many retirees are motivated to do what they can to get more out of Social Security. While there's always the possibility for savings to run out, Social Security is guaranteed to pay you a monthly benefit for the rest of your life. So you may be eager to lock in as large a benefit as you can. And a great way to do that is to file for Social Security at age 70.

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The earliest age you can claim Social Security is 62. But if you sign up then, you'll be locking in a smaller monthly benefit for life.

You're not eligible for your complete monthly Social Security benefit until you reach full retirement age, which is 67 for people born in 1960 or later. But there's also a huge financial incentive to delay Social Security past full retirement age.

For each month you hold off on claiming Social Security, your monthly benefit increases by about 2/3 of 1%. This means that every year you wait on Social Security raises your benefit by 8%.

Once you turn 70, you stop accruing the delayed retirement credits that give your monthly benefit that boost. But all told, filing for Social Security at 70 could result in monthly paychecks that are 24% higher (or more) than what they would've been at full retirement age.

You'd think that based on this, filing for Social Security at 70 would be a no-brainer. But it's actually more of a risky move than you might imagine.

The problem with claiming Social Security at 70

Signing up for Social Security at 70 means locking in a guaranteed larger monthly payday. But it doesn't actually guarantee a larger amount of lifetime income.

Remember, to come out ahead financially in the course of claiming Social Security at 70, you need to live long enough to make up for those years when you weren't getting benefits. And if you don't end up living all that long, then you could end up with a smaller lifetime payout despite a large boost to your benefits on a monthly basis.

As an example, a $2,200 Social Security benefit at a full retirement age of 67 becomes $2,728 a month when it's claimed at 70. That's a $538 difference. But you still need to live long enough to make up for years of not getting a smaller benefit.

Now in this scenario, if you live until 82 1/2, you'll end up with a total of $409,200 from Social Security whether you sign up at 67 versus 70. That makes 82 1/2 your break-even age.

But what it also means is that if you pass away prior to 82 1/2, you'll end up with less Social Security all-in. And so you'll need to ask yourself if you're willing to take that risk.

Look at the big picture

The decision to claim Social Security at 70 isn't one you should rush into. And there are different factors you should consider when making that choice.

First, be honest about your health. Poor health doesn't guarantee a premature passing, but it also doesn't bode particularly well for a longer life.

Also consider your family history if your health is average or good. If you have parents who still alive well into their 90s, you may be looking at a pretty long lifespan, too. That would make the case for claiming Social Security at 70.

Another thing to think about is whether you have a spouse who might rely on survivor benefits from Social Security upon your passing. If that's the case, you should know that the more money you get each month from Social Security, the more your spouse will be entitled to as a survivor.

All told, it's a tricky decision to make. But one thing you shouldn't do is assume off the bat that claiming Social Security at 70 is your best option. It may end up being a great choice for you, but you'll need to draw that conclusion after understanding the risk involved.

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