Waiting until age 70 to collect Social Security is a gamble

I wrote a recent column in which I pointed out that waiting until 70 to start your Social Security, which is the mantra of almost everyone who is trying to “maximize” their retirement benefit, is not always the smartest move.

But still many people insist on waiting until that alleged magic age to draw their first Social Security check. Today’s questions come from these folks.

Q: I have been planning to wait until 70 to start my Social Security. I will be 70 on Sept. 7, 2022. I want to make sure I get the absolute maximum Social Security benefit. I’m afraid that if I indicate September as my starting month, they will think I mean the August check that comes in September. And then because I will still be 69 in August, I will get the age 69 benefit rate instead of the age 70 rate that I’ve waited so long to get. Please help me.

A: If you want your benefits to start at age 70, then you will indicate September (the month you turn 70) as your starting month for Social Security benefits. It’s as simple as that. But if through some kind of fluke, they accidentally use August as your starting month — well, it’s really no big deal and nothing to lose any sleep over you would not get the age 69 benefit rate. You would get the benefit rate payable to people who started their Social Security at age 69 and 11 months. And that would be two-thirds of 1% less than your age 70 benefit rate. So, your ongoing benefit rate would be a couple dollars less than it would have been had you started your benefits at age 70. But on the other hand, you would end up with one extra Social Security check. In other words, for probably the next dozen years or so, you’d be ahead if your benefits accidentally started at age 69 and 11 months.

Q: My wife and I are both turning 67. Everything we hear and read about Social Security tells us that we should wait until 70 to start our Social Security. But we really don’t know what to do. We are so torn. We do have about $4 million in various investment funds, but we still want to make sure we get the biggest return on our Social Security investment. So, what should we do?

A: As I always point out in this column, I am not a financial planner. I’m just an old, retired Social Security guy. So, all I can really do is explain Social Security rules to you. And the best way I can do that is by having you read the chapter about when to take your benefits in my little Social Security guidebook called “Social Security: Simple and Smart” that you can get at Amazon and other booksellers. But having said that, I will make this observation: If I had $4 million available to me, I wouldn’t be losing sleep over my Social Security decision. It’s not like you are between a rock and a hard place when it comes to Social Security. You are between a pillow and a soft place. It sounds like you are going to be just fine no matter when you choose to start your benefits. To repeat, that advice is coming from a guy who is not a financial planner. But if you want some financial planning insight, see the answer to the next question.

Q: Half my colleagues tell me I should wait until 70 to start my benefits. The other half tell me to take benefits now. (I’m 67.) I just don’t know what to do.

A: I hear from financial planners all the time about this issue. And I can tell you that for every one who writes to tell me that I should always advise my readers to wait until age 70 to file for benefits, another financial adviser tells me that there is more research that shows the best course of action is to take benefits at full retirement age. So, there really is no clear consensus on this topic. But let me also add this: I hear from people all the time (usually widows) who tell me that their husband insisted on waiting until 70 to file for benefits. And then he died not too long after age 70, meaning that waiting that long was probably a mistake. On the other hand, I also hear from people now in their 90s who took benefits at age 62 who tell me they wish they had waited until a later age to start their Social Security. So, the bottom line is this: no one ever really knows. Obviously, each person just needs to look at a variety of issues when making that decision — things like health status, life expectancy, other income, taxes, potential benefits to widow(er)s, etc.

Q: I took my benefits at 66. I am now 75. I’m worried now that I made a big mistake by not waiting until age 70 to file. How do I figure out when I come out on the losing end of the Social Security stick?

A: First of all, why in the world are you worrying about this? If I were you, I’d be jumping up and down with joy, shouting, “Hey, I’m 75 years old and still kicking and I’ve been getting my full Social Security benefits for nine years now. What a lucky guy I am.” But still, if you’re going to fret about this, here’s how you can do the math. First of all, figure out how much you received in Social Security benefits between ages 66 and 70. Let’s say that was $2,500 per month for 48 months, or $120,000. Then figure out what your age 70 benefit would have been. It should be about 132% of your age 66 rate, or $3,300. The difference between your age 70 rate and your age 66 rate is $800. Then divide $120,000 by $800 and you get 150. So, you would have to live 150 months, or about 12 years, beyond age 70 (in other words, until age 82) before you start coming out on the losing end of the Social Security stick. So, you’ve got seven years yet before you need to go into a deep funk about having made the wrong Social Security choice. But to add to my earlier advice: if you’re still alive at 82, have a drink, jump for joy (if you still can) and forget about that funk. In other words, “Don’t worry, be happy.”