For many Americans, claiming Social Security benefits at 70 is a tempting proposition. You’ve worked hard for decades, and the promise of a higher monthly check is a persuasive one.
However, scratching beneath the surface reveals some unexpected hidden dangers. In this article, we’ll explore the less well-known risks of claiming Social Security at 70, and what you can do to mitigate them.
The Benefits of Delaying Social Security Until 70
While it may seem counterintuitive, delaying Social Security can actually lead to more overall income. According to the Social Security Administration, waiting until 70 can increase your benefits by up to 8% per month compared to claiming at 62.
That’s because Social Security benefits are calculated based on your earnings history, and the longer you wait, the higher your average earnings will be.
Hidden Danger #1: Delaying Benefits Can Affect Your Surviving Spouse
When one spouse passes away, the survivor is entitled to a portion of the deceased spouse’s Social Security benefits, as well as their own benefits.
However, if the deceased spouse claimed benefits early, that decision can come back to haunt the surviving spouse. According to AARP, claiming Social Security as early as 62 can reduce benefits for the surviving spouse by up to 30%.
Hidden Danger #2: Delaying Benefits Can Affect Your Healthcare Costs in Retirement
One often-overlooked aspect of Social Security is how it affects healthcare costs in retirement. While delaying benefits may not seem directly related, it can have a profound impact on your overall healthcare expenses.
According to a study by the Employee Benefit Research Institute, delaying Social Security can lead to increased healthcare costs due to the age-related health risks associated with a later retirement.
Hidden Danger #3: Delaying Benefits Can Affect Your Inflation-Adjusted Retirement Income
Inflation can eviscerate the purchasing power of your Social Security benefits, and delaying benefits may not provide the inflation-adjusted retirement income you need.
According to the Bureau of Labor Statistics, inflation rates can average around 3% per year, eroding the purchasing power of your benefits by 20-30% over a 10-year period.
While delaying Social Security may seem appealing, it’s essential to weigh these hidden dangers against the potential benefits of claiming at 62 or 66. By doing so, you can create a more informed plan for your retirement and ensure a more sustainable income stream.
