What’s the right time to claim Social Security? That’s a complicated question, as there are a lot of factors at play that can affect when you should start your benefits for the first time. There’s also some conflicting advice out there, so it can be hard to know what information to trust.
For Suze Orman fans, however, the financial guru has provided a clear answer on when to file for benefits. Orman has explained that delaying Social Security is virtually always the right choice in one specific situation. Here’s when Orman said you should absolutely wait to claim Social Security if you can.
If this is your situation, Orman says to claim Social Security as late as you can
According to Orman, “If you are in your late 50s and in good health, you should seriously consider the upside of delaying when you start, so you can earn a higher benefit.”
Orman has urged her readers to delay a claim, ideally until the age of 70, despite the fact that you become eligible to first claim benefits at 62. Orman believes waiting makes good sense because the rules of the Social Security benefits program result in a reduction in benefits if you claim your Social Security at a younger age.
In fact, as Orman points out, if you wait until you turn 70, your benefit continues growing month after month from the time you first become eligible for it. While each monthly increase isn’t huge, the cumulative impact of all of the monthly increases is very substantial, with Orman stating that “if you wait all the way until you turn 70, your benefit will be 76% higher than if you start at age 62.”
These monthly increases happen if you wait to claim benefits because you avoid early-filing penalties. These would apply if you claimed your Social Security checks before your full retirement age, which is 67 if you were born in 1960 or later. Once you have reached FRA and you continue to delay, you earn delayed retirement credits. Avoiding the penalties and earning the credits results in your benefit amount growing larger and larger.
Of course, you do pass up some years of income that you could have had if you claimed early. But, Orman has looked into the statistics and found that a woman alive at 65 has a 50% chance of still being alive at 88. This means that delaying would do more than just allow her to break even for the income she gave up by waiting. She’d receive her higher payment long enough to end up with more lifetime income. And, she’d have more money coming in later on in retirement when the money may really be needed if her savings runs out.
While Orman’s example specifically addressed women, men also often end up better off by waiting too. In fact, studies have shown that 7 in 10 retirees who wait until 70 get more lifetime income than early claimers.
Is Orman right about waiting until 70 to claim Social Security?
Orman’s advice about waiting until 70 to claim benefits is good advice.
Of course, there are times when this won’t be possible because you need your benefits to retire. There are also exceptions that apply in specific situations. For example, if your spousal benefits will be higher than your own Social Security benefits, you may want to claim your Social Security benefits to allow your higher-earning spouse to delay their own benefits for a while. Their bigger benefit can grow, and you can use your Social Security to bring income into the house. When they eventually claim, you’ll become eligible for your spousal benefits and switch over, so it won’t matter that you shrunk your Social Security checks.
For the most part, though, if you can make a delayed claim happen, it’s usually worth doing. You’ll still likely want to talk to a financial advisor about the best Social Security claiming strategy, though, as this decision can have a big impact on your financial security as a retiree, and you’ll want to make sure that you make the right choices.
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