Claiming Social Security at 70 can be valuable — but it isn't easy

  • In 2016, just 4.6 percent of women and 2.9 percent of men first claiming Social Security benefits were age 70 or older, according to the Social Security Administration.
  • Wait until age 70, and you're entitled to 132 percent of your full monthly benefit.
  • But delaying your claim isn't always easy — and it may not be the best option for some consumers.
Social Security with dollar bills
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Earlier this month, Mary Kittle joined the ranks of an elite few older Americans to achieve a particular financial feat.

Kittle, a Henderson, Nevada resident, applied in time to start receiving Social Security benefits on her 70th birthday.

In 2016, just 4.6 percent of women and 2.9 percent of men first claiming Social Security benefits were age 70 or older, according to the latest data from the Social Security Administration. A decade earlier, those rates were 2 percent and 0.8 percent, respectively.

Those claiming their benefits as soon as they become eligible to file at age 62 still represent the largest group, at 36.9 percent of women and 31.9 percent of men in 2016. But that cohort is down from 50.4 percent and 45.7 percent in 2006.

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"You can see a bit of a trend that people are starting to wait longer," said chartered financial analyst Wade D. Pfau, a professor of retirement income at The American College of Financial Services.

Potential reasons for the shift could include more people working into their retirement years, and becoming better educated about the value of delaying their claim, he said. (See details below.)

"Today because of the low interest rates and the fact that people are living longer, they are much more likely to benefit [from delaying]," Pfau said.

Social Security benefits math

Claim at your full retirement age — which depends on when you were born, and would be somewhere between age 66 and 67 for those born in 1943 or later— and you get 100 percent of the benefit available to you, based on your personal work record.

If you claim any earlier, your benefits will be permanently reduced — to what extent varies by your birth year and how much earlier you're claiming. For example, SSA estimates someone born in 1955 would receive 74.2 percent of their full monthly benefit by claiming at age 62, and 92.2 percent by claiming at age 65. (That cohort's full retirement age is 66 and two months.)

Hold out past your full retirement age, and you'll receive delayed retirement credits of 8 percent per year until age 70, when your monthly benefit stops increasing. Claim at 70 or later, and you'd be entitled to 132 percent of your full monthly benefit.

Kittle's initial plan was to file at or near her full retirement age, and invest the benefit while she continued to work. (A Southwest Airlines flight attendant, she currently has no plans to retire.) By Kittle's estimates, she'd break even by age 80 regardless of when she claimed.

Her son, Sean, made the case that she was better off waiting.

"I remember saying to him, 'What's the difference if I start collecting at 67 and put that money away?" Kittle recalls. "He said, 'OK Mom, but what if you live past 80?'"

Mary Kittle and her son, Sean, outside the Social Security Administration offices in Henderson, Nevada.
Provided by Mary Kittle
Mary Kittle and her son, Sean, outside the Social Security Administration offices in Henderson, Nevada.

Given that likelihood of longevity, the maxed-out benefit would provide a bigger guaranteed income, they reasoned. And additional years of work ahead of claiming would help Kittle replace zero- and low-income years on her record from when she was a young mother.

The combined benefits of delaying and adding higher-income years to the calculation boosted Kittle's monthly benefit by roughly $1,000.

"For somebody who hasn't worked their whole life and didn't have a job that had substantial income for most of their life … you need to take every opportunity to make it the best you can," she said.

Deciding: Should you delay?

Despite the benefits, waiting until age 70 to start taking Social Security isn't always the best option — or even, a feasible course.

"There are people who can't do anything else, whose savings haven't been such that they can wait," said certified financial planner David Mendels, director of planning at Creative Financial Concepts. "Sadly, that's not an insignificant amount of people."

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Here's how to assess if delaying is workable:

• Cast a wide net. To make sure waiting is a good option, work through all the potential claiming strategies available to you (and your spouse), said certified financial planner Megan Olson, a wealth manager at Accredited Investors Wealth Management.

For example, if you have a minor child at home, he or she could be eligible for a payment of up to half your benefit — which could make it more valuable to claim sooner than later, she said. Or you may be eligible to claim widow or widower's benefits while delaying your own, to let that money grow.

But on the other side, even consumers who anticipate claiming early due to a terminal illness might find they would benefit from delaying, to boost survivors benefits available to a spouse.

Factor in funding. If you're aiming to wait, there's a key question to answer, Mendels said: "How are you going to keep eating until you reach 70?"

You could keep working, which offers the quadruple advantages of continued income and additional opportunities to add to and grow retirement savings, while letting your Social Security benefit increase and potentially replacing a zero- or low-income year in your record.

Just keep in mind that "work longer" strategy may not be feasible, he said. (Nearly half of retirees leave the workforce earlier than planned, for reasons including work layoffs, health problems and caregiving for a family member, according to the 2017 Retirement Confidence Survey from the Employee Benefit Research Institute.)

"You don't know when you're going to die, but you do know what's more important to you. Is it that your heirs get more money, or that you and your spouse have a reduced chance of outliving your money?" -David Mendels, director of planning at Creative Financial Concepts

Or you might plan to draw from other assets, with the idea that you will take smaller distributions after you start drawing Social Security, Pfau said. Strategize with your financial advisor to assess how workable that idea is, and how best to approach it.

One strategy might be to create a "Social Security delay bridge" such as a certificate of deposit or bond ladder to span those eight years from ages 62 to 70, he said. That helps you generate income to replace the missing Social Security payout, and reduce exposure to market volatility.

Consider the end aim. Think about the timing of Social Security claiming in the context of your longevity risk, Mendels said.

If you claim early and die early, you got more money out of the system, he said — but if you live longer than anticipated, you may be at greater risk of a reduced standard of living. (By Social Security Administration estimates, that benefit represents at least 90 percent of income for 23 percent of married couples and 43 percent of single individuals.)

On the other hand, if you claim late and die early, your heirs stand to inherit less because you've spent down other assets to fund that delay. But if you live longer than expected, the bigger benefit means you've reduced the risk of outliving your money.

"You don't know when you're going to die, but you do know what's more important to you," he said. "Is it that your heirs get more money, or that you and your spouse have a reduced chance of outliving your money?"

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