The Hidden Costs of Delaying Social Security

Americans are tired. From job concerns to the overall mental load of trying to do it all, many are ready for a break. A 2025 Empower survey found that Americans would like to retire at age 58 on average and want to have at least $1.06 million in their retirement accounts.

Unfortunately, that's easier said than done. Given that the average 58-year-old has $261,000 put away for retirement, there's quite a gap to fill. For many, the only solution is to work until at least age 70, when they can receive the largest Social Security benefit they're eligible for.

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Hidden costs

There's no denying that waiting until age 70 to claim Social Security is the path to earning the largest possible monthly benefit. Yet, waiting isn't right for everyone. For some, waiting means losing the chance to enjoy retirement while they're still healthy. For many, waiting also means running into the hidden costs of postponing Social Security.

Opportunity cost

Each year that you delay Social Security between the ages of 62 and 70, you forgo 12 monthly checks. Waiting until age 70 means missing out on 96 total benefit payments. For example, if you're entitled to $1,500 per month at age 62, that would be $144,000 in benefits you could have invested, spent on everyday needs, or used to delay tapping into your retirement accounts.

Break-even point

Planning for retirement typically includes figuring out your break-even point -- the age at which the extra benefits you receive from claiming Social Security later equal the amount you would have received if you'd chosen to start early. However, the break-even calculation ignores the time value of money.

Due to inflation, a dollar today is worth more than it will be in six or eight years, particularly if you choose to invest early benefits or spend those funds rather than taking money from tax-advantaged retirement accounts, where your money can continue to grow.

Let's say you withdraw $25,000 annually from your IRA while waiting for larger Social Security benefits. Over the course of eight years, you would have taken $200,000 from your retirement account -- money that could have remained invested and continued compounding.

Tax bracket boost

Delaying Social Security until age 70 will provide you with the largest check you're eligible for. However, three to five years later -- at age 73 or 75 (if you were born in 1960 or later) -- you must begin taking Required Minimum Distributions (RMDs) from tax-advantaged retirement accounts. The combination of a larger benefit and your RMDs can push you into a higher tax bracket.

Claiming earlier allows you to spread retirement income more evenly through the years, which could help you remain in a lower tax bracket throughout retirement.

For some, delaying Social Security is the right move. For example, someone from a family with a long history of longevity, who also lives a long time, or someone who began saving for retirement late, may benefit from waiting.

However, that doesn't cover everyone. The best strategy depends on important issues, such as your health, how you hope to spend retirement, and your overall financial picture. As you plan, remember to factor in the pros and cons associated with both waiting and claiming benefits early.

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