Should a Retiree File for Social Security at 62 or 70?

Abstract

Retirees can file for Social Security benefits as soon as they are 62 years old, but payments will become larger if they delay up to a maximum of 70 years of age. Many people believe the best strategy is to wait until later to file in order to maximize benefit payments. In this article, we reexamine that advice and add two considerations. First, we discuss how the claiming decision is made and recognize that in many cases the individual’s goal is to support new lifestyle options, not to maximize Social Security withdrawals. Next, we consider alternative sources of income and how using those resources affects the claiming decision. The article concludes with example scenarios that demonstrate how a financial advisor might advise clients on the best strategy for their particular situation.

TOPICS: Wealth management, retirement, social security

Key Findings

• • Popular advice recommends delaying Social Security filing to maximize benefits, but one-third of retirees file at the earliest possible age.

• • Retirees generally switch from asset accumulation to consumption. Their life goals may not fit with a benefit maximization strategy.

• • Some individuals are forced into a claiming decision based on personal circumstances. For these individuals, delaying claiming may not be practical.

• • Those with alternative resources have the most decision flexibility. They will make portfolio-based decisions and will not focus solely on Social Security income. The best choice will need to be tailored to individual circumstances.