Deciding on the age to claim Social Security has its advantages, with waiting until you’re 70 allowing you to maximize the monthly income from the Social Security Administration. It’s common for many individuals to surpass the life expectancies the benefits formula was established upon, resulting in greater lifetime benefits by delaying until 70.
Despite the benefits, waiting until 70 may not be the ideal choice for everyone. However, there’s a compelling reason to start taking your benefits well before your 70th birthday.
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Preserving Your Savings by Claiming Benefits Early
One compelling reason to claim Social Security long before 70 is to help prevent excessive spending of your 401(k) or other retirement investment accounts. With the average retirement age in the U.S. being 64, it’s improbable to continue working until 70.
Retiring at 64 means needing to support yourself for a significant period before maxing out your monthly Social Security check. The same holds true for retirement at ages 65 or 66, or any time prior to when your Social Security benefit reaches its maximum.
Relying solely on savings without an income from the program can pose challenges if you require more funds to live on than your investments can safely provide.
The Pitfalls of Draining Savings to Increase Social Security Benefits
It’s crucial to avoid excessive withdrawals from your retirement accounts, as this may hinder your ability to earn returns. Withdrawing too much, too soon, runs the risk of depleting your funds rapidly, leaving you with minimal returns and dwindling principal.
Experts typically advise limiting withdrawals to 4% or less in the first year of retirement, adjusting for inflation thereafter. Relying solely on savings may force you to exceed this safe withdrawal rate, necessitating substantial withdrawals.
While waiting until 70 for higher benefits may seem appealing, it’s important to note that Social Security checks alone are inadequate, as they are designed to replace only about 40% of pre-retirement income. This falls short of the 80% typically required for retirement expenses.
Choosing a smaller Social Security check to supplement with savings is more advisable than receiving a larger check and depleting your investment accounts.
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