Retirement Planning: The Surprising Drawbacks of Claiming Social Security at 67
When it comes to planning for retirement, one of the most critical decisions you’ll make is when to claim Social Security benefits. While many retirees opt to claim benefits at their full retirement age, which is 67 for those born in 1960 or later, this decision may not be as straightforward as it seems.
Delaying Social Security benefits until age 67 may seem like a wise move, but it comes with several downsides that retirees need to consider. For one, forgoing Social Security checks for five years may require you to continue working longer or deplete your other retirement savings. Additionally, there’s a risk that you could lose your job, become unable to work, or experience poor market performance, which could deplete your savings more quickly than anticipated.
Moreover, delaying Social Security benefits may not necessarily guarantee a higher lifetime income. You’ll need to live until at least the average life expectancy in your 60s to break even, and there’s a risk that the Social Security trust’s reserves could be depleted during your lifetime, resulting in a cut in benefits.
On the other hand, delaying Social Security benefits until age 70 can result in a significant boost to your monthly check – a 24% increase, to be exact. This increase is particularly valuable, as it occurs during the steepest part of the benefit increase curve.
However, your claiming decision should also take into account your spouse, if you have one. Claiming at age 67 can have a major downside for the high earner in a household, as it could leave their spouse with a lower survivor benefit. In extreme cases, delaying benefits until age 70 can be particularly beneficial for the high earner, as it can ensure a higher survivor benefit for their spouse.
Ultimately, claiming Social Security benefits at age 67 may not be the best decision for everyone. It’s essential to weigh the pros and cons and consider your individual circumstances before making a decision. By understanding the nuances of claiming Social Security benefits, you can make an informed decision that maximizes your retirement income.
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