Why I’m Waiting for 70!

In this blog, I’ll disclose my surprising reason why I’m waiting for 70 for Social Security benefits.

Many experts suggest that waiting until age 70 is the best strategy for most people. That’s the age when you qualify for your maximum, enhanced benefits. You can earn roughly 8 percent for every year you wait from 67 to 70.

Yet, a large majority of those on Social Security today started collecting their benefits before their Full Retirement Age, and therefore receive reduced benefits.

The latest Social Security Administration’s Statistical Report noted that in 2020, about 29 percent of newly filed retirees were age 62. Only 27 percent filed at their FRA of 66, and only 8 percent filed at age 70 or later for their maximum benefits.

Sounds like a lot of people haven’t gotten the message!

Why do people file early?

1. They need the money. If you have very little saved for retirement and little or no pension, you may need Social Security income as soon as you can get it.

2. Health reasons. Your health profile may prompt you to start collecting early, because you believe you may not last as long as your 70s and 80s to make the wait worthwhile. If that is your situation, you are making the right call. Go for it and enjoy your benefits now.

3. Doubts about the Social Security solvency. You don’t think Social Security will be around too long, so you are going to get your money while it lasts. I think that is too cynical. I can’t believe a program once known as the “third rail of politics” will lose its juice any time soon.

Yes, the actuarial reports suggest that the trust funds will run out by 2034 and benefits may need to be cut to about 78 percent of normal. But given the choice between electrocution and raising taxes, I think politicians will raise taxes and retirement ages for younger workers before they cut benefits to current retirees.

For those who have the patience — and the savings — to wait for 70, the benefits do pay off. The latest numbers from the SSA shows that a retiree with a Primary Insurance Amount of $1,000 a month at age 67, could receive 30 percent less, or $700 a month by filing at 62.

Or they could receive 24 percent more, $1,240 a month by waiting until 70. In fact, for each year, the monthly amount would grow by 8 percent. Not many investments nowadays could produce such returns.

There are a lot of simple break-even calculators that will show you just how long you must wait before accumulated benefits begin to surpass the benefits of those retirees who filed at earlier ages.

Social Security used to provide a break-even calculator, but took it down because it was leading some people to make the wrong decisions. I think it was because people misused a simple calculator, which could show a break-even point at ages in the late 70s or early 80s. So people decide, why wait?

As an example, I used the Social Security’s quick estimator, which allowed you to plug in past earnings, birth date, and potential claiming date to give you an estimate of benefits.

So I created a hypothetical Joe, born on December 15, 1960, who will reach his Full Retirement Age of 67. I entered claiming years to give me the estimated benefits for ages 62, 67, and 70. Joe would be eligible for $2,121 at age 62, $3,013 at 67, and $3,736 at age 70.

One quick way to calculate a break-even point is multiply the annual total at 62 ($22,452) by the five years between 62 and 67 ($127,260) and then divide that by the difference between the 62 and 67 annual benefits ($10,704). That gives a result of 11.89 and when that number is added to age 67, the formula gives you a break-even age of 78 and 10 months. The break-even between 67 and 70 is 82 and six months. So if you have to wait until 78 or 82 to see a break-even point, file early! (See table below.)

No wonder people take the money and run.

However, every person needs to make a Social Security decision that fits their full financial picture. If you have a spouse who will be counting on spousal benefits, the numbers change.

Let’s assume Joe has a spouse, Jane, who for the sake of simplicity, is close in age to Joe. She has earned less in her career, so a spousal benefit equal to one-half of his PIA at FRA will be more than a benefit based on her own earnings.

And again, for simplicity’s sake, both are the same age when they file together. It changes the picture significantly.

If they file at 62, Joe’s benefit is reduced by 30 percent but Jane will only receive about 32 percent of his PIA or $8,323 a year. Her spousal benefit is reduced because she is filing early too. The combined benefits would be $33,775. That is nearly 38 percent lower than if they both waited until 67, when their combined benefit would be $54,234.

But, a warning about waiting until 70: While it may pay for Joe to wait for 70, Jane’s spousal benefit will never be larger than half of Joe’s benefit at age 67. Only the primary earner’s benefits increase that 8 percent a year.

Unfortunately, a spouse cannot claim a spousal benefit until the retiree files for benefits. So if Jane didn’t have a benefit in her own name, they would likely need to both file at 67 for the best benefits.

If Jane did qualify for a benefit on her own work history, then she could file at 67 and then move up to her 50 percent spousal benefit when Joe files at 70 for the maximum benefits.

In my case, my wife is nearly four years younger than I am. So, I’m waiting until 70, when she will be close to her Full Retirement Age. So that is one reason I am waiting until 70.

But, that’s not the only reason I’m waiting for 70. I’m also waiting for the best survivor benefits for my wife. Let’s go back to our example of Joe and Jane. Jane’s survivor benefits will be the same as Joe’s primary insurance amount when he dies. If Joe files at 62, Jane’s survivor benefits will be smaller. If Joe files at 70, the survivor benefits will be larger. In fact, Jane will get 124 percent of the survivor benefit — after her Full Retirement Age — if Joe files at age 70. But she will only get 70 percent of the survivor benefit if Joe files at 62. And that amount will continue for the rest of her life. And what if Joe dies after age 67 but before he files at 70? Jane would get a benefit equal to the benefit as if Joe had filed before death.

So by waiting until 70, I am going to assure my wife gets the largest survivor benefit she can receive.

I’ve posted the spreadsheet with all these numbers on my Google Sites at https://sites.google.com/view/iwasretired/resources/spreadsheets. Or see my YouTube video on the subject: https://youtu.be/II8lv2WuBCE

One of the best ways to estimate your filing strategy is to visit https:www.opensocialsecurity.com, a free engine created by Michael Piper, a noted Social Security expert. Just have your ages and benefit amounts from your MySocialSecurity account to get the best answer.

Now, I’m not an expert like Mike Piper. So take this as entertaining ideas from one educated consumer to another. Always do your own due diligence, and seek out a professional, if you need one.