Financial experts typically recommend delaying claiming Social Security benefits for as long as possible. This allows your benefit amount to grow through delayed retirement credits. But author David Bach believes there are compelling reasons to claim benefits as early as you can.
Maximize Your Benefit Years
The conventional wisdom says to wait because it results in higher monthly payments. For each year you delay claiming benefits beyond your full retirement age (FRA), your benefit amount increases by about 8% annually until you reach age 70.
So if your FRA is 67 and you wait until 70 to claim, your monthly benefit will be about 24% higher compared to if you claimed at 67.
On the surface, this makes sense mathematically. You receive a permanently higher monthly benefit by waiting. But Bach points out that while the monthly amount is higher, you receive that increased payment for fewer years.
“By waiting to take a larger benefit check, you’re giving up years of payments,” Bach said. “The sooner you start claiming, the more total lifetime payments you can collect.”
For example, if you claim benefits at 62 instead of your FRA of 67, you permanently reduce your monthly benefit by about 30%.
However, you receive those payments for 5 additional years. For many retirees, the tradeoff of more years of benefits makes up for the reduction in the monthly amount.
Use the Money Today
Bach also argues that if you don’t need the larger monthly benefit to cover necessities, why not take the money earlier and enjoy it today?
“If Social Security is just a bonus on top of other retirement income, take it as soon as possible,” Bach said. “Take more trips, help your family, give more to charity. Don’t wait to live it up.”
He believes too many retirees take a scarcity mentality with their Social Security benefits. They worry about delaying claiming to maximize their monthly income without considering the benefits of extra disposable income today.
Prepare For Potential Cuts
Another one of Bach’s main arguments centers around concerns over Social Security’s long-term financial challenges. The latest Social Security Trustees report projects that by 2035, payroll tax revenue will only cover about 75% of scheduled benefits.
Without Congressional action, this would require a 25% reduction in Social Security benefits. Bach believes retirees who will depend heavily on Social Security should claim as early as possible to receive the highest lifetime benefits in case future cuts are enacted.
“Sadly, if you’ll really need Social Security, get ready for cuts,” Bach said. “Claim early to get the most years of full benefits just in case.”
For those not yet eligible for Social Security, Bach recommends aggressively ramping up retirement savings today to supplement any potential future cuts to Social Security benefits. Even small increases can make a big difference over time.
Practicing What He Preaches
Bach isn’t just preaching about early claiming, he plans to follow his own advice.
“The day I’m eligible for Social Security, I’m taking it,” Bach said. “I’m not going to wait while the government continues to push back claiming ages and threaten cuts to benefits.”
While not everyone’s situation is alike, Bach believes that early claiming makes sense for many retirees. By claiming as soon as you’re eligible, you can maximize the number of years you receive benefits.
For those who don’t need every dollar, it provides more income today to enjoy life. And for those dependent on Social Security, it insulates against potential future cuts to the program.