Should You Delay Social Security Until Age 70? The Surprising Truth

Should you Wait Until Age 70 to Claim Social Security?

For years, financial experts have promoted a seemingly simple strategy: delay claiming Social Security until age 70 to get the biggest possible monthly check. But like many aspects of retirement planning, what seems straightforward on the surface can be far more complex when you dig deeper.

The Traditional Wisdom

The conventional approach suggests waiting until age 70 to claim Social Security benefits because your monthly payment grows by 8% each year you delay after full retirement age. This growth is guaranteed, regardless of market performance.

Why This Advice May Be Wrong For You

According to Ryan Thacker of B.O.S.S. Retirement Solutions, “Delaying your benefits will grow by 8% guaranteed every year and that check gets bigger. You throw some cost of living adjustments on it, but you also have to look at the whole picture on this equation.”

The Tax Impact

One of the biggest factors often overlooked is taxes. When you delay Social Security and rely on IRA or 401(k) withdrawals for income, you could trigger higher taxes on multiple fronts:

• Up to 85% of your Social Security benefits could become taxable
• Your required minimum distributions (RMDs) at age 73 could push you into a higher tax bracket
• Your Medicare premiums might double due to higher reported income

The Two Camps on When to Claim Social Security

There are typically two opposing viewpoints on when to claim Social Security:

1. Claim at 62: Take smaller checks but receive them for a longer period
2. Wait until 70: Get the largest possible monthly benefit

However, neither approach accounts for your complete financial picture.

The Medicare Premium Trap

What many people don’t realize is that your Social Security claiming decision can directly impact your Medicare costs. “We’ve had so many people who when we get to the solution and we say, hey, good news, you’re not getting pushed up into a higher Medicare bracket. They say something like, what do you mean? I thought everybody paid the same amount for Medicare,” shares Tyson Thacker of B.O.S.S. Retirement Solutions.

A Customized Approach Is Critical

Instead of following general rules of thumb, you need to consider:

• Your other income sources (pensions, IRAs, 401(k)s)
• Your tax situation
• Your spouse’s benefits
• Your health and family longevity
• Your current income needs
• Your Medicare premiums

The Spousal Benefit Factor

Your claiming decision doesn’t just affect you. If you’re married, it impacts your spouse’s benefits as well. In some cases, claiming early might allow your spouse to access benefits sooner, potentially putting more total dollars in your household’s pocket over time.

The Social Security Trust Fund Reality

With the Social Security trust fund facing potential depletion by 2034, some experts suggest claiming benefits sooner rather than later. While benefits won’t disappear entirely, they could be reduced by up to 25% if Congress doesn’t act to shore up the program.

Making Your Decision of When to Claim

Here are key factors to consider when deciding when to claim:

1. Your tax bracket now versus later
2. Your other retirement income sources
3. Your spouse’s age and benefit amount
4. Your health and family history
5. Your immediate income needs
6. Your Medicare premium thresholds

The Role of Professional Help

Given the complexity of these decisions, working with a qualified advisor can help you avoid costly mistakes. At B.O.S.S. Retirement Solutions, they’ve helped over 30,000 families make informed Social Security decisions.

Real-World Example

Consider this example from B.O.S.S. Retirement Solutions: A couple came in planning to delay benefits until 70 to maximize their monthly check. However, after analyzing their complete financial picture, it was discovered that claiming earlier would:

• Reduce their overall tax burden
• Keep them below Medicare premium increase thresholds
• Allow them to preserve more of their retirement savings
• Provide better lifetime benefits when considering both spouses

The Income Stream Strategy

Rather than focusing solely on getting the biggest Social Security check possible, consider how your benefits fit into your overall retirement income strategy. This includes:

• Pension payments
• IRA/401(k) withdrawals
• Investment income
• Real estate income
• Other retirement savings

Don’t Rely on the Social Security Administration

While Social Security Administration employees work hard, they are not allowed to give personal advice about claiming strategies. They also don’t have visibility into your complete financial picture, including:

• Your other retirement accounts
• Your tax situation
• Your spouse’s benefits
• Your Medicare premiums
• Your other income sources

Taking Action to Maximize Your Social Security Benefits

If you’re within five years of claiming Social Security, it’s time to develop a comprehensive strategy. Consider getting a professional analysis that looks at:

• Optimal claiming age based on your specific situation
• Tax implications of different claiming strategies
• Impact on Medicare premiums
• Spousal benefit opportunities
• Overall retirement income plan

The Bottom Line for Your Retirement Income

The decision about when to claim Social Security shouldn’t be based on general rules of thumb or what worked for your friends or family members. It requires careful analysis of your complete financial picture and personal circumstances.

Don’t risk losing tens of thousands in lifetime benefits by making the wrong choice. According to Forbes, 96% of Americans forfeit an average of $111,000 in Social Security income. Make sure you’re not one of them.

Get Professional Help

For a customized analysis of your optimal Social Security claiming strategy, consider reaching out to retirement planning professionals who specialize in this area. B.O.S.S. Retirement Solutions offers a free Social Security analysis for those who have saved at least $200,000 for retirement and have not yet filed for benefits. To schedule your free analysis, call 800-918-3015.

Remember, your Social Security claiming decision is one of the most important financial choices you’ll make in retirement. Take the time to get it right by considering all factors, not just the size of your monthly check.