I thought the common wisdom was right to wait as long as possible to claim Social Security at 70 when I reached retirement age. I’d heard repeatedly how waiting would allow me to receive better monthly benefits. However, when looking back, I regret not having considered other things sooner.
Are you approaching retirement age and debating when to take your Social Security benefits? Many argue that the wait is the smartest financial option, but that is not the case for everyone. Here are ten reasons I may have been better off if I had claimed benefits earlier.
The Breakeven Point Is Often Overestimated
Financial advisers often say you’ll make up for delaying benefits after a “breakeven point,” typically between 78 and 82. However, many think they will live beyond this period without considering any risk.
You may be unable to wait until you hit this breakeven point if you have unexpected expenses or your income needs increase. For certain retirees, having benefits available earlier can give them greater peace of mind and financial stability.
I Missed Years of Financial Freedom
Social Security provides many retirees with the freedom to travel, pursue hobbies, or help loved ones. By waiting, I missed years when I had more energy to enjoy those experiences.
Though your monthly benefits would be smaller if you start receiving them early, the years you gain to enjoy and be independent might justify it. At other times, quality of life in the initial retirement years is most important, and the maximum long-term payout is not realized.
Health Isn’t Guaranteed
I assumed I would have plenty of years of good health to enjoy higher benefits. Unfortunately, that has not been the case. If your health or longevity is uncertain, waiting until 70 to claim Social Security doesn’t make sense.
As stated by the Social Security Administration (SSA), the average life expectancy for a man retiring at 65 is 84 years, and a woman retiring at 65 is 87 years. Now, these are only averages, not a promise. If, on the other hand, you are aware of having health issues or come from a family that has lived shorter lives, then delaying may not do much for your longevity.
Relying Solely on Savings Was Stressful
When I started withdrawing Social Security, I was sure I had enough retirement savings. However, the market saw its ups and downs much faster than I had seen in my nest egg.
In 2023, Vanguard reported that retirees who delayed Social Security withdrew 4% more annually than they would otherwise have from their portfolios. This can thus increase stress on savings and accelerate the time they run out of assets.
My Spouse’s Benefits Were Affected
I failed to see that my taking leave would affect my spouse’s benefits. My spouse was left to wait a bit longer, relying on only their smaller benefit.
Couples who are claiming should consider both partners. Adjusting start dates can maximize overall household income instead of maximizing individual benefits.
Economic Uncertainty Changed Everything
I did not anticipate a rising cost of living, a volatile economy, or the delay I faced when I did not claim benefits. Since inflation happened, waiting has been much harder on my monthly budget.
But even Social Security Cost of Living Adjustments (COLA) won’t always make up for it. Waiting may not always match real-world expenses, especially in economic downturns.
I Missed Years of Compounding Interest
If I had claimed earlier, I could have funded part of my income and kept more savings invested in the market. With the extra time, I could have had years of compounding growth.
CNBC reports that even small additional savings can cause a lot of portfolio growth over time. By delaying, I relied too much on stagnant savings, avoiding key opportunities.
Life Circumstances Changed My Plans
Not all retirements work out as expected. I didn’t plan on being a caregiver, sinking my savings, or having to support adult children financially.
The open access to Social Security benefits just before 62 offers that critically flexible option. Resources that you might urgently need are locked up when you wait.
I Didn’t Fully Account for Taxes
I didn’t realize how much my Social Security income would be taxed when I started receiving it. For those who have other income sources, delaying will move you into a higher tax bracket.
SSA data shows that taxes may hit the proceeds of as much as 85 percent of Social Security benefits, depending on income. In this case, claiming earlier can spread income over more years, which may help lower tax liability in the long run.
Unexpected Expenses Limited My Options
Rising healthcare costs and home repairs were expected to add up, but they surprised me more than I expected. It would have relieved financial stress from the claiming during these moments.
According to a 2022 Fidelity study, today, a 65-year-old couple will spend $315,000 on healthcare alone in retirement. Planned for or not, unplanned costs can be buffered by accessing Social Security early.
Disclaimer – The Finance Key does not provide and does not intend to provide financial, investment, tax, or legal advice. Information contained in this article is for informational and educational purposes only. This list is solely the author’s opinion based on research and publicly available information. Including links to third-party content is not an endorsement by The Finance Key of such content or services. Please do your due diligence and use your discretion.
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