Delaying your claim for Social Security until the age of 70 is often the right financial move. Many financial experts agree it makes sense to wait to get benefits because delaying maximizes monthly income. And for around 60% of seniors, claiming at 70 would also mean getting more lifetime benefits as well as higher checks each month.
But while this may be sound advice for most people, it’s not necessarily the right advice for every retiree.
In fact, depending on your situation, starting your benefits at 70 could end up leaving you faced with a financial disaster that could’ve been avoided had you just claimed benefits earlier. You definitely don’t want that to happen, so watch out for this one big red flag that suggests claiming Social Security at 70 could be a huge mistake.
Don’t claim Social Security at 70 if you face this risk
There are many reasons you might want to start your benefits sooner than the age of 70. But if you find yourself in a situation where not starting your checks could mean taking too much out of your retirement accounts, you absolutely don’t want to delay.
See, many people can’t wait until 70 to leave the workforce. Retiring sooner isn’t a choice, but instead is their only option. You could find yourself faced with this situation if you’re unable to find a job later in life or if you suffer from health issues that make working impractical or impossible. The need to care for aging parents or even a sick spouse could also force you into earlier retirement.
If you’re unable to earn a paycheck, you need money from somewhere. For most people, there are two sources of income available: Social Security and retirement accounts. And when there are bills to be paid that require a certain amount of money, you’ll have to take money from savings to cover them if you’re trying to wait to claim Social Security.
Unfortunately, if you end up making large withdrawals from retirement savings accounts, you could drain those accounts way too quickly. You need to leave enough money invested to continue to earn a reasonable rate of return so your assets don’t dwindle too much. And that may not be an option if you rely on your savings alone just to get larger Social Security checks later.
The boost to your Social Security check that comes from waiting until 70 can be substantial. You’ll avoid the early filing penalties applied if you claim before your full retirement age and earn delayed retirement credits that raise the amount of your checks between your full retirement age and 70. But even if you’ve maxed out your checks and are getting the largest amount of retirement benefits possible, chances are good your Social Security income isn’t going to be enough by itself to help you maintain your quality of life.
The last thing you want is to be staring at an empty bank account and trying to survive on Social Security alone when you could’ve claimed your benefits a bit earlier and preserved your nest egg so you’d have both investment income and retirement benefits to rely on.
Of course, before you claim early, you should explore other options such as cutting your budget a bit or even doing some part-time work. And if you have a spouse, be strategic about which of you claims benefits early (often, it makes sense for the lower earner to do so).
But the important thing is not to become so focused on the advantages of a delayed Social Security claim that you sacrifice your savings. If you can’t make the numbers work at a safe withdrawal rate and you don’t have other options, claim your benefits so you can avoid losing the entire nest egg you worked so hard to build.
