Why Claiming Social Security at 64 or 67 Could Be a Big Mistake

Most Americans in good health benefit by delaying claiming Social Security retirement benefits to age 70 because their benefit increases with each year of delay past age 62 (up to 70), the first year of qualification. Social Security provides inflation-linked longevity insurance and, up until Covid, life expectancy was increasing in the U.S. You can outlive your investments but not Social Security. 

One can choose any time between age 62 and 70 to begin collecting benefits. But, like most Social Security claiming decisions, one needs to be very strategic. Specifically: 

• The benefit retirees get for delaying their Social Security claim does not increase at a consistent rate; it rises in steps.
• The benefit of claiming after step years is much larger than other years.
• This strategy is particularly valuable for women.

"The bonus retirees get from waiting to claim Social Security income benefits increases in two steps. These steps... result in differences as high as $10,000 in the incremental value of waiting an additional year...."

This is how the increases work: 

The percentage increase is 5% year from 62 to 64. After age 64 the yearly increase is 6 2/3% up to the full retirement age (67 for someone born in 1960). After age 67, the bonus increases to 8% a year until age 70. 

The percentage increase from deferral should rise gradually each year instead of increasing at ages 64 and 67. These two steps mean that the gain from waiting an additional year is higher the first year of each step. 

So if you are planning to claim SS at age 64 it is beneficial to wait one more year to age 65. If holding out until age 67 (full retirement age for younger boomers), wait until age 68 to maximize benefits. "The second step from age 67 to 68 is even more valuable to all groups of retirees than the first step from 64 to 65."

The full article provides convincing dollar amounts to illustrate these points. Thanks to Dr. Michael Finke but this valuable information. You can read his full article at: https://www.thinkadvisor.com/2022/02/15/why-claiming-social-security-at-64-or-67-could-be-a-big-mistake/