Why Claiming Social Security Early Might Be the Smarter Move -- Even If You Live a Long Life

One of the trickiest financial decisions you might ever have to make is figuring out when to claim Social Security. Although your monthly benefit payment is based on your personal wage history, your filing age also dictates how much money Social Security pays you each month.

If you claim Social Security at full retirement age, you'll get your monthly benefits in full. But if you file early, which you can do starting at age 62, your benefits will be reduced. And the earlier you claim, the more of a hit you'll face (meaning filing at 62 will reduce your monthly checks more than filing at 65).

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You can also delay Social Security past full retirement age for boosted benefits. Each year you wait, up until your 70th birthday, increases those monthly checks by 8%.

When you expect to live a long life, claiming Social Security at 70 often makes the most financial sense when your goal is to score the biggest possible lifetime payday. But here's why claiming benefits early may be the smarter move, even if you expect to be around for quite a long time.

The numbers don't tell the whole story

From a pure numbers standpoint, if you expect to live well into your 90s, claiming Social Security at 70 will generally put much more money in your pocket than filing early.

Let's say your full retirement age benefit at 67 is $2,200. If you file at 62, you'll shrink your monthly checks to $1,540. If you wait until 70 to file, you'll boost your monthly checks to $2,728.

Now let's say you end up living until 95. Here's what your lifetime Social Security benefit looks like in each scenario:

• If you file at 62, your total payday will be $609,840
• If you file at 67, your total benefit will be $739,200
• If you file at 70, your total paycheck will be $818,400

Based on this, it's easy to make the argument that you should sit tight and wait until age 70 to claim Social Security if you think you'll live a long time. But that overlooks the advantages of having your benefits start coming in sooner.

For one thing, claiming Social Security early takes pressure off your retirement savings at a younger age. And those benefits could be the key to preventing long-term portfolio losses.

Let's say the stock market crashes early on in your retirement. If you're waiting on benefits and therefore getting all your income from your portfolio, you might have to sell assets at a loss. But if you do that early on, your portfolio might never fully recover. Claiming Social Security early could, in a situation like this, protect against sequence-of-returns risk.

Getting your benefits early could also spell the difference between meeting lifelong goals and not.

Imagine you want to travel extensively in your early 60s but you need your retirement savings to cover your basic needs. Filing for Social Security could allow you to take those trips at a time when your health still makes them feasible. Wait five or eight years, and you may no longer be in good enough physical shape.

A decision to weigh carefully

Claiming Social Security on the later side scores you a larger lifetime payday if you live until your 90s or beyond. But that doesn't mean delaying your claim is the right choice, even if you expect to live that long.

While filing for benefits early may short you on lifetime Social Security income, it could do other good things for you. It could prevent massive losses in your individual retirement account or 401(k) and make it possible to do the things you've always wanted.

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