For a long time, almost every advice about retirement were: ‘’If you receive the highest Social Security monthly payment, wait until you’re 70 to apply for it.’’ This might sound like the logical thing to do since the more you wait the more money you will receive. However, this doesn’t always work so well…
Financial planner D’Andre Clayton, co-founder of Clayton Financial Solutions, explains that delaying Social Security benefits can actually hurt some people instead of helping them. This isn’t because the advice is wrong, but because every person has different health, finances, and life circumstances. So, let’s explain this situation more clearly.
Should people wait until they are 70?
Clayton points out that delaying Social Security benefits can become a risk. He doesn’t say this because the system is wrong, but because every person has a different life, health, and finance. One of the ideas he talks about is the “break-even point.” This is the age when, after waiting to claim your benefits, the total amount you’ve received finally matches what you would have gotten if you had started earlier.
For example, if you wait to claim Social Security until age 70 instead of 65, you won’t get more money overall unless you live to around age 81 or 82. In other words, the benefits of waiting might not really be felt until you reach your early 80s.
However, there’s a problem with this: the average life expectancy for men in the U.S. is 75.8 years, and for women is 81.1 years. This means that many people — especially men — may not live long enough for waiting to actually pay off.
What if one spouse dies?
Clayton mentions something not many people know: if one spouse dies, the surviving partner loses one Social Security check. In some cases, the surviving spouse may also be pushed into a higher Medicare cost tier, because of required minimum distributions or capital gains. As a result, the financial benefit of waiting might disappear.
The cost of waiting too much
Another reason why delaying Social Security can be a problem is the missed opportunity to invest. If someone decides not to receive the benefit from the age of 62 to the age of 70, this person is losing 8 years of payments. All that money could have been invested in things like: a Roth account, the stock market, or new or emerging assets (including Bitcoin).
Clayton explains that these investments might grow more than the extra Social Security money gained by waiting. He also mentions concerns about the future of the Social Security program; he does not believe Social Security will end, but he warns that benefits may need adjustments to keep the system stable.
One possible change is that the extra money people get for delaying their Social Security could be reduced or adjusted — which would make waiting less helpful in the future.
So…
When planning for Social Security you should look at your health, your lifestyle, your goals, and even your family situation because all play a part in what decision will benefit you most. That’s why financial planner D’Andre Clayton encourages people not to follow advice blindly, even if it sounds like the “smart” thing to do. Instead, he reminds you to look at your real life, not just the numbers on a chart.
Your Social Security timing should fit your life, not a one-size-fits-all rule. Instead of wondering, “What should everyone do?” focus on asking yourself, “What works best for me?”