Delaying Social Security for a higher payment is overstated. Here’s why.

Social Security is the main source of retirement income for many people, and for some it is the only source. You can start receiving Social Security benefits at age 62, or you can defer your benefits until age 70, which will increase your monthly total. While delaying your benefits until you reach age 70 may seem like a good thing because of increased benefits, it may also be overstated. Here’s why.

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The wait might not be worth it

The amount of your social security benefit in retirement largely depends on your retirement age. Social Security bases this benefit on your full retirement age, which can vary depending on your year of birth.

year of birth Full retirement age
1943 to 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

Data source: Social Security Administration.

If you retire at full retirement age in 2022, the maximum monthly benefit is $3,345; if you take early retirement at age 62, it’s $2,364; if you delay your benefits until age 70, your maximum benefit increases to $4,194. The jump in benefits while waiting until age 70 may seem significant, but it’s slightly misleading. Your checks will be larger, but you’ll receive far less than you would when taking benefits earlier or at full retirement age. If your full retirement age is 67, there are 60 months between 62 and 67 and 96 months between 62 and 70 – that’s a fair amount of missed cheques.

Say you were born in 1970 and currently earn $80,000. Using the Social Security Benefits Calculator, here is the expected monthly salary and total amount you would have received at certain ages:

Age at which you start receiving benefits monthly benefit Total received by 80 Total received by 85
62 $1,605 $346,680 $442,980
67 $2,410 $375,960 $520,560
70 $3,075 $369,000 $553,500

Data source: Social Security Administration

Using these numbers, you can see that at age 80, delaying your benefits until age 70 would have resulted in lower overall benefits than if you had started at age 70. At age 85, total benefits may be higher, but there’s no way of knowing if someone will live long enough for the trade-off to make sense.

Make the most of your retirement

Another key aspect here is being able to get the most out of your retirement. You have no way of knowing when you will die, so delaying benefits for years can impact your quality of life in your early retirement years. Some new retirees may want to travel and take up new passions and hobbies, which will inevitably cost money.

Instead of pushing Social Security benefits until age 70, many will find it more rewarding to receive their benefits early — even with the lower monthly payment — so they can have the cash to take on those new businesses and passions. You have worked hard and paid social security contributions throughout your career; give yourself a chance to reap these benefits as soon as you can.