Delaying Social Security

If you’ve spent your whole life working and paying into the Social Security system, your gut reaction might be to cash in on the benefits ASAP. As a matter of fact, more people file as soon as they’re eligible than any other time. But is that really the best move?

As a reminder, you are eligible to file for Social Security as early as age 62 (and must file by age 70). Every year you wait to file earns you an 8% increase in your benefit. Even though that’s the case, many people file as soon as possible at age 62, or at “Full Retirement Age” (age 65-67 depending on when you were born). Rarely do people wait until age 70. However, there are many reasons why it might make sense to hold tight, lock in those 8% increases, and delay filing as long as possible.



One way to think of Social Security is as insurance against outliving your savings. If you have a financial plan or have looked at retirement projections, you’ve probably been asked about your life expectancy. For those exercises, it is helpful to come up with an estimate based on your health and family history. However, with life expectancies generally increasing and advances in medicine, it’s quite possible you may live much longer than you expect.

As you might imagine, living a lot longer than you planned for might put you in danger of running out of money. Obviously, that’s not ideal. On the flip side, however, if you delay Social Security, you will actually benefit from living longer. You’ll get a higher amount for many more years, which will easily make up for those first few years of not getting any benefits while you waited to file. If you’re worried about outliving your money, you may want to consider delaying Social Security.



One of the biggest threats to financial success in retirement is inflation, or the increase in the cost of goods and services over time. In other words, it will cost you more money in 40 years to live the same lifestyle you live today. Hopefully you’ve factored that into your planning and projections, but even then, there’s always a chance inflation will be higher than you expected.

The good news for everyone, and especially for those who delay filing, is that Social Security is adjusted for inflation (also called the Cost of Living Adjustment, or COLA). This means that as goods and services get more expensive over time, your Social Security benefit will increase accordingly. This benefits everyone receiving Social Security, but COLA will be even more powerful for those who delay, since they will be getting increases on a higher benefit to begin with. For example, in 2018 the COLA was 2%. As you can imagine, 2% on $2000 is more significant than 2% on $1000, and those raises compound over time.



This is probably the most common concern amongst retirees. What if the market crashes? Will I run out of money? The most important way to plan for this is to make sure you have an investment mix ahead of time that is appropriate for your situation and your goals.

Beyond that, delaying Social Security is another way to brace yourself against bad market performance. The more money you’re getting from Social Security means less money you’ll be forced to take out of your investments, especially while they are down. You’ll have more flexibility to wait for a recovery and allow the markets to do their thing.

These are a few reasons why it might make sense to delay filing for Social Security as long as possible. There are also reasons you may not want to delay. In some circumstances, filing before age 70 might make the most sense financially, which is totally fine as long as it’s part of a well-thought-out financial plan. There’s also an emotional aspect; after spending decades working and grinding and paying into the system, some people just want their money!

That being said, too many people blindly file as soon as possible or at Full Retirement Age without learning about their options and determining the best course of action. Hopefully these ideas can spark some thoughts and conversation amongst you and your loved ones…and your financial planner!

About the Author: Josh Bentz

Josh Bentz, CFP®, Wealth Advisor, helps clients organize and simplify their financial lives by providing comprehensive, personal financial planning. As a Wealth Advisor, Josh provides comprehensive financial planning for clients. He enjoys getting to know individuals and families so he can give specific, meaningful advice. He believes in being a fiduciary and doing what is in the best interest of clients.