Wait until age 70 to claim Social Security: ‘The return on being patient is huge,’ says economist

The first Social Security check was issued 83 years ago. The check, for $22.54, went to retired legal secretary Ida May Fuller of Ludlow, Vermont.

Today, in 2023, the average retirement benefit is $1,827 per month, according to the Social Security Administration.

The maximum Social Security benefit for someone retiring at full retirement age is $3,627 per month. Full retirement age currently ranges from 66 to 67, based on date of birth.

How much you collect in retirement is mostly based on how much you earn during your career.

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But there is a way you can increase the monthly checks you receive — delaying benefits.

Recent research finds all U.S. workers ages 45 to 62 would benefit from waiting until beyond age 65 to start receiving benefits.

Meanwhile, more than 90% would benefit from waiting until age 70.

But only about 10% of workers actually wait until then, according to estimates from Boston University economics professor Larry Kotlikoff, Federal Reserve Bank of Atlanta executive vice president David Altig and Opendoor Technologies research scientist Victor Yifan Ye.

Claiming before age 70 results in an estimated median household loss of $182,370 in lifetime discretionary spending for claimants ages 45 to 62, the researchers found.

“The return on being patient is huge with Social Security,” Kotlikoff said.

Eligibility for Social Security retirement benefits starts at age 62 for workers who have earned 40 credits, or 10 years of qualifying work.

Workers and employers each pay a 6.2% payroll tax toward Social Security. In 2023, that tax applies on up to $160,200 in earnings.

Those contributions count toward the Social Security retirement benefits workers may claim later in life. Generally, the higher your lifetime earnings, the higher the benefits you may receive.

Early retirement can also affect the size of your monthly checks.

Those who turn 62 this year will have their benefit reduced by about 30% for claiming now compared with waiting until their full retirement age of 67, according to the Social Security Administration.

For each year delayed past full retirement age, 8% is added to Social Security benefits.

There are certain benefits to waiting to claim. By waiting until at least age 65, retirees can ensure they are eligible for Medicare coverage.

At full retirement age, workers stand to receive 100% of the benefits they earned.

By waiting even longer, up to age 70, retirees can lock in even bigger benefits, which is especially valuable if they live longer than expected.

Retirement benefits taken at age 70 are 76% higher, adjusted for inflation, than retirement benefits taken at 62, the research found. This holds true even as the retirement age gradually climbs higher to 67.

The value of waiting to claim applies to households with a range of financial resources.  

“The rich have the most to lose by screwing this decision up,” Kotlikoff said. “But the poor have relatively more to lose because they’re more dependent on Social Security.”

Three-quarters of workers who live to just age 85 would benefit by waiting until age 70, the research found.

Because of the high value of waiting to claim, workers should do what they can to delay, including withdrawing from retirement accounts early, working longer or downsizing their home.

The return for waiting to claim Social Security benefits may also beat stock market returns, which are highly risky, Kotlikoff noted.

“You should beg, borrow and steal to avoid taking your benefits too early,” Kotlikoff said.

But there is one caveat: For those who anticipate dying sooner, it may make sense to claim early. However, those claimants still need to consider the value of the benefits they could be passing on to their loved ones through survivor benefits.

“Even then, the benefit for a dependent spouse could be such that you want to wait to collect so that they could have a higher widow’s benefit or widower’s benefit,” Kotlikoff said.

Research from J.P. Morgan Asset Management also points to the value of waiting to claim Social Security. Workers often retire earlier than planned, with health problems or disability and company downsizing among the common reasons cited, the firm’s research has found.

Those who are not working and who do not have other sources of income may want to consider claiming their benefits early, the research suggests.

The same goes for those who do not anticipate living beyond age 77, who may want to take benefits at 62, or those who do not anticipate living beyond 81, who may want to consider claiming at their full retirement age, according to J.P. Morgan.

Approximately 13% of retirees are entirely dependent on Social Security for income in retirement, according to Kotlikoff’s research. About 40% of retirees are more than 50% dependent on those benefits.

Admittedly, it may be challenging for lower-income workers to wait until 70 or even full retirement age to claim retirement benefits.

The good news for them is the program is very progressive, so it will replace a larger share of their earnings.

“The lower-income workers do, as a percentage of their income, get more out of the program,” said Sharon Carson, retirement strategist at J.P. Morgan.