By Vincent R. Birardi, CFP®, AIF®, Wealth Advisor at Halbert Hargrove.
Is there any benefit (pun intended) to delay claiming your Social Security benefits until you reach age 70? The answer is a resounding yes.
Odds are you’ve heard that Social Security will be going broke in the very near future and you should begin claiming your Social Security retirement benefits as soon as possible. While there are longer-term Social Security funding concerns, its imminent demise has been exaggerated.
What’s your full retirement age?
With that in mind, if you’re considering when to begin claiming your benefits, you’ll first want to confirm your full retirement age.
Full retirement age, also called “normal retirement age,” was 65 for many years. In 1983, Congress passed a law to gradually raise this because people are living longer and are generally healthier in older age. Specifically:
- The retirement age for those born in or before 1954 is 66.
- This gradually increases by a few months for every birth year between 1955-1959 until it reaches 67 for people born in 1960 and later.
As detailed on the official Social Security website (https://www.ssa.gov/benefits/retirement/planner/ageincrease.html).
If you start receiving benefits at your full retirement age, you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase. The maximum age for accruing benefits is 70.
How delaying your claim affects your benefit
The increase you’ll receive is based on your date of birth and the number of months you delay the start of your retirement benefits.
If you start receiving retirement benefits at age:
- 67, you’ll get 108 percent of the monthly benefit because you delayed getting benefits for 12 months.
- 70, you’ll get 132 percent of the monthly benefit because you delayed getting benefits for 48 months.
When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.
The big motivator: 32 percentage points
This boost applies regardless of your year of birth. So, the longer you delay claiming benefits, the higher your benefit.
The average American’s life expectancy has continued to increase over time — although tragically, COVID’s impact put a dent in that average last year. (Life expectancy at birth for the total U.S. population in 2019 was 78.8 years.[1]) Assuming you’re in good overall health and have other financial means to support your retirement cost of living, it’s usually in your best interest to delay taking benefits as long as possible. If you have questions about your particular circumstances, we’re always happy to talk through these with you.
Two last considerations: Many people don’t realize that Social Security has a cost of living adjustment based on inflation measures called the CPI (Consumer Price Index). When the CPI goes up by a couple percent, Social Security benefits also go up a couple percent — this way, when inflation increases, so does the amount of money you’re getting every single month. And finally, an important note to those who choose to delay claiming Social Security benefits. This will not impact your eligibility for Medicare —be sure to sign up for Medicare Part A at age 65.
How do you balance having the life you want to enjoy today with what you’re going to need in the future? Are you doing what it takes to enter your dream retirement? TAKE OUR QUIZ to find out.
Disclaimer:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice.
Source:
[1] U.S. Life Expectancy Dropped In First Half Of 2020 : NPR
