You Should Delay Social Security Until 70 - Unless You're in This One Situation

Want to get ahead financially during retirement? One surefire way is to wait until age 70 before claiming Social Security.

More than 90% of workers would earn more in Social Security income during retirement by waiting until 70 to file for benefits, according to research from the National Bureau of Economic Research (NBER).

Yet, despite this truth, only about 10% of retirees choose this path. To complicate matters, there is actually one situation where waiting until 70 to claim is likely a mistake.

Why waiting until 70 often pays off

As a general rule, waiting longer to file for Social Security benefits means getting a bigger monthly payment throughout retirement.

Most people are first eligible to file for Social Security when they turn 62. But filing this early comes with a big drawback.

Those who were born in 1960 or later and who claim at 62 see their monthly benefit reduced by 30% compared to those who claim at 67, which is known as "full retirement age."

But the story gets better for those who wait even longer. For each year you delay filing for benefits between 67 and 70, your monthly payout increases by 8%.

Note that there is no extra benefit to waiting beyond age 70. That means you should never wait until after 70 to claim.

How much does it help to wait until 70?

The NBER found that failing to wait until 70 to claim can have enormous financial repercussions.

The median household that claims too early loses around $182,000 in discretionary income during their retirement lifetime, according to the NBER.

To illustrate, a standard $2,000 monthly benefit drops to just $1,400 for those who claim at age 62.

By contrast, those who wait until age 70 to claim see their benefit swell to $2,480. For those on fixed incomes, that extra money can significantly improve their financial lives.

The biggest reason not to wait until 70 to claim

The perk of waiting until age 70 to file for benefits evaporates for those who claim spousal benefits instead of their own retirement benefit.

If you wait until your own full retirement age to claim spousal benefits, you can earn as much as 50% of your spouse's primary insurance amount. However, your benefit does not grow at all if you wait beyond full retirement age.

Thus, delaying until age 70 gets you nothing but a bunch of missed checks. Once your spouse claims their own benefits and you achieve full retirement age, there is no reason to wait longer.

When waiting until 70 makes sense

The formula is pretty simple: If your own earnings record has set you up for benefits that eclipse 50% of your spouse's benefit, you likely could benefit from waiting until age 70. However, if claiming spousal benefits makes more sense for you, it likely makes more sense to claim no later than your full retirement age.

Additional reasons to claim earlier

There are other possible reasons you might not wait until age 70 to file for Social Security benefits. For example, those who are in poor health and who do not expect to enjoy a long retirement might want to claim earlier.

Others may need the money earlier in life and simply cannot afford to wait until they turn 70. As with most financial matters, there is no one right decision that makes sense for everybody. Your financial wants and needs and your life situation will dictate whether waiting until age 70 makes the most sense for you.

If you are unsure of which strategy to use, consider consulting with a financial advisor or other money pro to determine the right moves.

Don't count too much on Social Security

For most retirees, deciding when to claim Social Security is one of the most important decisions of their golden years. However, those who have built up a nice nest egg probably feel less pressure to make the perfect choice regarding when to file.

In other words, saving more money gives you more options and leaves you feeling less stressed out. The Social Security Administration (SSA) has emphasized that Social Security was never intended to be a retiree's sole source of income.

If you are still working, try to save more money so you won't have to count so heavily on Social Security income.

Bottom line

Many people would benefit from waiting until the age of 70 to file for Social Security benefits. Yet, that is not the right move for everyone.

Knowing your own situation can help you make the best choice about when to file. And if you are still working, start investing and saving more money so you won't be so dependent on Social Security income during your golden years.