Reasons to Delay Taking Social Security until Age 70

As baby boomers approaching retirement in some form, we as a group of mostly still working adults are thinking more and more about Social Security retirement benefits and when we should claim them. I find myself studying and contemplating this issue more now than ever because of the hit Mrs. GoTo and I took in our retirement accounts.  I am definitely counting on Social Security being there when we retire.

Those that answer the question of when to claim Social Security retirement benefits usually fall into one of three categories.  First, there are those that either choose to or are forced by circumstances into claiming benefits at age 62, the first year of eligibility.  In fact, a recent survey showed that 45% of baby boomers aged 61 planned on claiming retirement benefits at age 62.

The second group suggests waiting to claim benefits until you reach what the Social Security Administration calls your “full retirement age.”  For those baby boomers born between 1943 and 1959, the full retirement age falls between age 66 and 67.  One of the primary reasons for waiting until the full retirement age is that a retiree cannot get on Medicare until age 65 anyway and for that reason alone may end up working until age 65.

The third group of Social Security claimants believe that a further delay until age 70 is the preferred strategy.  This is the option that I want to consider in this post.  I will be thinking and writing about the “age 62″ and “full retirement age” options at another time.

In thinking about reasons to wait until age 70 to claim Social Security benefits, let’s start with the pure financial reason. For each year (after your full retirement age) that you delay claiming benefits, your monthly benefit will increase by 8%.  (This assumes that you are born in 1943 or later.)   For Mr. GoTo, that represents a difference in actual dollars of $788 ($3,102 at age 70 vs. $2,314 at age 66).  Looking at it in terms of investment returns, by delaying for four years from age 66 to age 70, I receive a 34% return on my four-year “investment.”  And that is a recurring and guaranteed return, year after year for at least as long as I live.  It is hard to beat that kind of return.  Granted, that is not a technically accurate calculation because I would have to factor in the payments that I did not receive during the four delay period as well as my life expectancy.  But I think you see the picture.

Also, the increased benefit from the delay until age 70 is subject to further compounding from the annual cost of living adjustments that Social Security provides.

Another way of looking at the financial value of delaying until age 70 is to determine how much it would cost to purchase a single-premium annuity to give you the same increased benefit. In my case, the increased benefit is $788/month, adjusted for inflation.  An inflation adjusted joint-life annuity (more about the “joint-life” part below) quoted from Vanguard that would provide that monthly payment would cost approximately $158,000 if purchased at age 66.  If I take withdrawals from our retirement accounts equal to the 48 months of Social Security payments that I don’t claim between age 66 and age 70, that totals $111,072.  (48 x $2,314).  In other words, by delaying Social Security benefits for four years, I would be using $111,072 to do the equivalent investment work of $158,000.  That’s a very good trade-off.

Taxation of Social Security benefits also has to be considered, as a function of any other income that you have.  Basically, the taxation works like this:

If you file an individual tax return and your “combined income” is:

  • between $25,000 and $34,000, you pay income tax on 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits will be taxable.

If you file file a joint return, and you and your spouse have a “combined income” that is:

  • between $32,000 and $44,000, you have to pay income tax on 50 percent of your benefits.
  • more than $44,000, up to 85 percent of your benefits will be taxable.

For purposes of taxation of Social Security benefits, your “combined income” is your adjusted gross income (from your tax return) + nontaxable interest + one-half of your Social Security benefits.  This can get rather complicated.  But the key is that you need to consider what your other income levels are during the time that you will be receiving benefits.

Finally, I need to think about perhaps the most important reason to consider delaying Social Security until age 70:  the survivor benefit. Mrs. GoTo is four years younger than I am.   Also, because she worked very little after our children were born, her Social Security benefit will be small in comparison to mine, approximately $1000 at full retirement age.  Assuming that I die first, she would be entitled to claim a survivor’s benefit equal to 100% of my benefit (assuming she is at her full retirement age.)  So you can see that the choice I make as to when to claim my benefits will dramatically affect my wife’s income after I die.  The survivor benefit makes the Social Security retirement benefit similar to a joint-life annuity.

This is why it is so important to consider your spouse’s financial condition when assessing when to claim your own Social Security retirement benefit.  Your decision can really help or hurt those that depend on you most.

If I end up delaying my benefits until age 70, we can consider having Mrs. GoTo claim her benefits at age 62, with me claiming a spousal benefit at that time (at age 66 for me).  I could then switch to claiming my benefit at age 70.   I will be thinking and writing more about that strategy later.

If this has you thinking and you want to experiment and analyze benefit estimates, pull out your annual Social Security Statement and study it.  Or you can access the Social Security Online Benefit Estimator.

Photo Credits:  Jeffrey Dulgar/TalkRadioNews and Wally Gobetz


  1. says

    I think it is great to wait if you can…However today people seem to need money more than ever. ALso…honestly who knows what condition the social security fund will be in in the next ten years or so…My opinion..take it when you can!!!!

  2. says

    I’d already come to that conclusion. Actually, the conclusion I arrived at is that working to age 70 is not an option, what with my life savings decimated by outcome of Our Beloved Leaders’ interesting economic theories.

    However, this is easier said than done. If you’re laid off, you could find it extremely difficult to get another job. Younger people having a hard time getting work. For an elderly person it could prove impossible.

    Don’t forget, BTW, that if you have some savings you can use SS as a kind of interest-free loan. You can start taking payments before you hit full retirement age and then when you’re 66 (if you’re in my age bracket) you can turn back the amount you’ve drawn down and reset your payments at the “full retirement” rate; the gummint also returns the tax you’ve paid on the returned money. The increase is likely to be significantly more than 4% or 5% of the amount you’d take out of savings. In my case, the increase would be over $1,000 a month. If I’m canned, this is exactly what I intend to do, using SS as a kind of unemployment insurance and trying to get by until age 66 on that and the $14,000 one is allowed to earn before the government starts taking its money back.

    I think this strategy MAY apply to the difference between age 66 and age 70 draws. It would be worth checking into.

    At age 66, they don’t take your money away from you if you continue to work. If you can in fact do a turn-back maneuver to get the age 70 payments, then it might be worth starting SS payments at 66 and investing the money. If you die young, your wife is still entitled to your SS (if hers would be less than half of yours, I think), and she would get the cash you had already collected.

  3. says

    Consider this scenario: husband and wife both 66 and both retired, husband entitled to $1200/month and wife entitled to $500/month.
    The wife files at 66 for her $500/month. The husband files for spousal benefit of 1/2 ($500) = $250/month. The husbands waits until age 70 and files for his benefit increased by 32% = of $1200 * 1.32 = $1584/mon.
    Can the file then file for spousal benefit of 1/2 ($1584) = $792/month?

  4. Deb Kelson says

    How about making Social Security means tested? In other words, those making over $100,000 (like Senators and Presidents) ayear won’t need social security. That way, blue collar workers, those who’ve work for rich people all their lives like me, (I’m a career nanny)don’t have to wait until 70 to get SS since we’ve worked our fingers to the bone and dont’ have a 401K to fall back on. Blue collar workers won’t have the stamina to work to 70. Our old bodies will be worn out by then. I’m sick of rich politicians deciding on what they do with my retirement and they’re the ones who hired people such as myself all their lives. Their attitude is “Let’s just sh*t all over them and have them live in poverty until 70. We don’t care!” ‘ll fight this to the end!!! I’m mad as hell that they are even thinking of it!!!!

  5. Alexander Rosental says

    NOT waiting until 70 to take etirement:

    Another way I looked at it very simply is in terms of when will I be able to withdraw the same cumulative amount that I have if starting at 66. My calculations are you have to wait until 79 1/2 to 80 1/2 to recover your delaying and the NPV at 90 yrs old is almst the same(~$40K). Evaluate your risks-life expectancy however you want, but I just dont see why to wait EXCEPT for the 85% tax liability if you are still working.Anybody?(I’m 66 next week-12/2011)

    • MJP says

      Your argument has been made many times by many different people but it assumes that by taking SS before age 70, you will come out ahead by saving/investing the SS income you take earlier. Studies have shown however that the vast majority end up spending that money, not investing it. Also, your calculation may be way off depending on future inflation rates because the difference in benefit levels will be adjusted upward by COLA.

  6. Judy Hardeman says

    I waited until age 70 to apply for SSI and I am also getting RR Retirement for wives. Will RRRetirement decrease the amt. if I take SSI now at age 70? I understand that It would be to my advantage IF I TAKE IT NOW WHICH I HAVE.

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