The unfortunate truth about claiming Social Security at age 70

The most common advice for retirees is to delay taking Social Security as long as possible, until age 70 if you can. The reason is solid: Delaying benefits ensures you'll be seeing higher monthly benefits once you start collecting, and odds are you'll increase your lifetime benefits in most cases by delaying until age 70.

But waiting to claim your Social Security benefits also comes with some downsides. Here's the unfortunate truth about claiming Social Security at age 70.

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It's not completely risk-free

While the Social Security Administration guarantees that you'll get a larger benefit check for each month you delay beyond your eligibility age, waiting to claim benefits still comes with some meaningful risks. After all, waiting to claim until age 70 means you don't claim earlier, which means you give up up to eight years of benefit checks.

As mentioned earlier, odds are that you will maximize your lifetime benefits by waiting until age 70. Data from the CDC show that a 62-year-old would live long enough to receive more lifetime benefits if they delayed Social Security, but that's just an average.

A 2019 study by United Income found that 57% of retirees would have maximized their wealth in retirement by waiting to claim until age 70. However, this also means that 43% of retirees would not have been able to maximize their wealth By waiting all this time. However, only 6.5% of retirees would have more wealth in retirement if they claimed it at age 62 or 63, according to the study, so you'll probably want to wait at least a few years.

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Unfortunately, there is no way to know whether you belong to the majority or not. There are reasons you might think you won't, such as having a health condition that reduces your life expectancy. But in the end, you'll have to take the risk by waiting to claim your benefits.

You can temporarily reduce your spouse's benefits

Your spouse may be able to claim higher benefits on your earnings record than if he were to claim them on his own record. Social Security spousal benefits allow a spouse to collect up to half the amount his or her partner will receive at full retirement age. This can provide a significant boost to its benefits.

But there's a catch: Both spouses must be actively collecting Social Security benefits.

Importantly, unlike personal retirement benefits, spousal benefits are maximum at full retirement age. This means that if you are waiting to claim your benefits but your spouse has already reached full retirement age, you may receive a much lower benefit than you would if you were also collecting benefits.

Coordinating Social Security claiming strategies with your spouse requires some complex calculations. Talking to a financial advisor about your specific situation may be worth the time and money for many.

You may leave less to your heirs

When you delay your Social Security benefits, you'll likely rely more heavily on your retirement accounts to support your retirement spending in your 60s. Additionally, although the value of your Social Security annuity will increase while you wait, it has no residual value after you pass. In other words, once you're gone, your Social Security is worth $0 (with the possible exception of survivor benefits for a widow or widower). Conversely, any money left in your retirement account will go to your beneficiaries.

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This may prompt some to decide to collect early in hopes of parlaying the growth into their Social Security benefits. Early collection will allow you to withdraw less money from your retirement accounts before you turn 70. This gives your money more time to accumulate than someone who waits until age 70 to claim it, and may result in a larger inheritance for your heirs.

This strategy comes with much greater risk than waiting to claim benefits. Social Security offers a guaranteed inflation-adjusted increase in your monthly benefits by deferring. Early collection and keeping more money invested in the financial markets opens the door to a poor sequence of returns resulting in less money being left for your beneficiaries, or perhaps not having enough to afford retirement in your later years. If you are considering this strategy, make sure you understand the risks involved.

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