Social Security: 3 Great Reasons to File for Benefits at 70

By Maurie Backman Markets Fool.com

Many seniors jump to collect Social Security as soon as they possibly can. Though the full retirement age for today's older Americans is 66 or 67, eligible recipients can file for benefits as early as age 62. And while there's technically no upper limit for collecting benefits, there's no incentive to delay Social Security past age 70, so that's typically considered the latest age to file for retirement benefits. But if 70 sounds like the wrong time to file for Social Security, here are three good reasons to convince you otherwise.

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1. You'll maximize your benefit payments -- forever

Your full retirement age is the age at which you're eligible to receive your Social Security benefits in full. You can claim early, but doing so will lower your benefit amount, and that reduction will remain in effect for the rest of your life. Similarly, you can wait on those benefits and get an 8% increase for every year you hold off up until age 70, at which point you can no longer accumulate delayed-retirement credits.

For example, if your full retirement age is 66 and your full benefit amount is $2,000, then claiming at 62 will leave you with a monthly payment of $1,500. Claiming at 70, by contrast, will give you $2,640 a month -- for life.

Now, there is a downside to delaying benefits: While you will increase your monthly payments, you'll collect fewer payments over the course of your life. So if you're in poor health and don't expect to live past your early 70s, then delaying Social Security may not make as much sense. However, if your health is decent and you have no reason to think you won't be around well into your 80s, then filing for benefits at 70 could put more cash in your pocket overall.

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2. You'll increase your survivor benefits, too

It's not just your own life expectancy you should keep in mind. You should also consider the ways you can maximize Social Security for your survivors' sake.

Typically, if you pass away and leave behind a surviving spouse, then that spouse is eligible for survivor benefits based on the payments you received. So if you claim your benefits early and take a hit on your base amount, then that reduction will impact your spouse after you're gone. Similarly, if you wait until 70 to take benefits and increase your base payment amount, then your surviving spouse will get to enjoy those higher payments for the rest of his or her life. That's why it might pay to hold off on Social Security even if your health isn't great. If you expect your spouse to live a long life, those higher payments will help ensure that he or she doesn't run out of money in retirement.

3. You don't need the money sooner

You're allowed to file for Social Security well before you reach 70, but if you don't actually need the money right away, then you might as well hold off and let your benefit amount grow. If you're still working or have adequate savings to cover your living expenses, then delaying your benefits until age 70 essentially allows you to generate a risk-free 8% return on whatever your full benefit amount would've otherwise been. And a guaranteed 8% annual return is all but impossible to come by.

Of course, some might argue that if you don't need Social Security to pay your living costs, you're better off taking it earlier than 70 and investing it yourself. And if you're ultra-confident in your ability to bring in a return that's higher than 8%, by all means, give it a go. But just know this: Though the S&P 500 has generated an average annual return of roughly 9% over the past 100 years, it's also had periods of serious decline. Case in point: It lost 38% back in 2008. Now if you have many years to ride out the stock market's ups and downs, then there's a decent chance you'll score above an 8% return on your investments over time. But if you're looking to invest for the short term, then the stock market is a fairly dangerous prospect. And there lies the appeal of delaying Social Security: You get to grow your benefits without assuming the same risks as stock investors.

Waiting until age 70 to collect Social Security isn't feasible for everyone, but if you're in a strong enough financial position to hold off on taking benefits, you'll be rewarded in more ways than one. Remember, the age at which you first take benefits will impact your payments for as long as you continue to collect them, so be sure to weigh the pros and cons before making your decision.

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