One of the toughest decisions you might have to make in the context of your retirement is determining when to claim Social Security. Those benefits are available to you at any point once you turn 62. But filing that early means accepting a reduced monthly benefit for life.
In fact, you're not entitled to your complete monthly Social Security benefit based on your individual wage history until full retirement age arrives. That age hinges on your year of birth, and is either 66, 67, or somewhere in the middle.
There's also a huge incentive to delay your Social Security claim past full retirement age. For each year you do, up until age 70, your monthly benefit gets an 8% boost.
Of course, waiting until age 70 to sign up for Social Security also introduces an element of risk. If you don't live long enough to make up for years of missing benefits, you risk losing out on lifetime Social Security income despite a higher payment each month. And that explains why so many seniors have a hard time figuring out when to claim benefits.
One big study, however, sheds some light on the matter and offers up actionable advice. But whether that advice applies to you is a different story.
What the data says
A 2019 report by United Income found that seniors will lose a collective $3.4 trillion in potential retirement income due to claiming Social Security at a suboptimal time. That amounts to an average of $111,000 per household.
Notably, the report found that about 57% of retirees would fare better financially if they were to wait until age 70 to claim Social Security. As of 2019, only 4% of retirees were choosing to wait until age 70 to file for benefits. By contrast, the report found that only 6.5% of retirees would have more income if they claimed Social Security prior to age 64.
This data makes sense, given an increase in life expectancies, and also, given the guaranteed higher monthly payday a delayed Social Security filing results in. And it certainly makes the case for waiting until age 70 to sign up for Social Security, since an additional $111,000 in retirement income could do a world of good for many people.
But delaying Social Security isn't the right choice for everyone. And it may not be the optimal path for you.
When filing for benefits at age 70 doesn't make sense
It's clear that the typical retiree might fare better financially by claiming Social Security at age 70. But you may be an exception to that rule for a few different reasons.
First, you may not end up living to an average life expectancy due to health issues you struggle to shake. That's clearly an unfortunate situation to be in. But if you're unlikely to live past your early or mid-70s, then filing for Social Security at age 70 isn't your most lucrative bet. In that scenario, it generally pays to sign up for benefits as early as possible -- meaning at age 62 -- for a larger lifetime payout.