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Social Security: Claim Now or Wait Until Later?

Money experts weigh in with opposing views

A balanced scale with a clock on one side and a ball of money on the other, is framed
DigitalVision, iStock / Getty Images

 

Many financial experts — including those within AARP — believe that if you can afford it, you should wait until age 70 to begin receiving Social Security benefits. The argument is simple: With each year you wait after reaching your full retirement age, your monthly check will be 8 percent larger, an annual rate of return that’s hard to beat. Given that people are living longer, the argument goes, chances are good that the delay will optimize your benefits across your lifetime.​

But other experts — also including those within AARP — note that there are cases in which signing up earlier is wiser; it’s not always a clear-cut issue. To explore the question more fully, AARP asked two outside financial advisers to argue the case.

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The expert​: Kurt Czarnowski, is a retirement planning consultant and a former Social Security Administration regional communications director.

If you need Social Security checks to pay rent, buy food or cover health care costs, then the decision is obvious: Start taking benefits when necessary. ​

But for those with some financial wiggle room? There are no guarantees in life, and the sooner you start drawing a monthly benefit, the sooner you can start using it however you want, Czarnowski says. And you may enjoy the money more when you are younger.​

Trying to predict your life span isn’t always a good bet, either. “Your family can have remarkable longevity on both sides, and you can still have an accident tomorrow,” Czarnowski says. It makes even more sense to take your benefit at full retirement age or earlier if you have health problems that might shorten your longevity.​

Take it at full retirement age​​.

— Kurt Czarnowski

As to the math: The plus of starting benefits at age 66 or 67 is that your money accrues over a longer period. It won’t be until you’re 82 years and 6 months old that you will get fewer dollars overall from Social Security than if you waited until age 70.​

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And if you are married, you can coordinate your benefits with your spouse in a way that gives you some of the advantages of waiting. If you are the lower-earning spouse, for example, you can take your benefits at full retirement age, get monthly checks and later claim your later-filing spouse’s higher benefits if you are the survivor. And if you have children under the age of 18, they can each collect half your benefits every year once you file. (The family as a whole, however, can’t collect more than 180 percent of the parent’s full retirement age benefit.)​

Finally, if you do decide to take your benefit at full retirement age, that decision is not irrevocable. “Change your mind within 12 months of starting your benefits and you can get a do-over by repaying the benefits already collected,” Czarnowski says. Even after that 12-month deadline, you can simply suspend benefits and begin increasing your benefits at a rate of two-thirds of 1 percent a month, which comes out to 8 percent a year. ​

The expert: ​Elaine Floyd, is director of retirement and life planning with Horsesmouth, a New York company that trains financial advisers on Social Security strategies and other issues.

​That 8 percent annual increase in your benefit isn’t trivial; three or four years of 8 percent annual credits could mean many hundreds more in benefit dollars per month. That can make your later years more free of worry. “It’s longevity insurance in case you live a long time,” Floyd says. ​

Wait until 70

— Elaine Floyd

The other expert notes the benefits of married couples being strategic about when to claim, but it’s particularly smart for the higher-earning spouse to wait to claim until 70. Take a man who gets $2,600 a month or $31,200 a year in Social Security income at full retirement age of 66 while his lower-earning spouse gets $1,800 a month or $21,600 a year claiming at the same age. When he dies, his wife can claim annual survivor income of $31,200. But if he had waited to claim until age 70, those annual survivor benefits would be $41,184 — about $10,000 a year higher. ​

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As for the chance you’ll die young and miss out on your benefit, “In financial planning it’s generally better to bet on living longer rather than betting on dying sooner,” Floyd says.​​

The data bears that out. At age 70, about a quarter of men are expected to live to see age 90. For women, more than 35 percent are projected to hit 90. “Although people may initially want their money as soon as possible, they often change their minds once they do the math,” Floyd says. ​

Finally, if you decide to wait but have an emergency or just a change of heart, you can always change plans and file to begin collection. Whatever time you waited after full retirement age has an impact — even if you claim before age 70. “Your benefits increase by two-thirds of 1 percent for every month that you delay taking your Social Security,” Floyd says. ​

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Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.

membership-card-w-shadow-192x134

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Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.