Question: I waited to claim Social Security and never got around to filing by my 70th birthday. Did I goof?
Answer: Given that many private-sector employers have phased out pensions and that the median retirement savings balance among Americans 65 to 74 was only $200,000 as of 2022, Social Security is clearly an extremely important income source for retirees. Many older Americans rely on Social Security to cover their basic expenses. And even those with decent savings appreciate having those benefits to supplement their retirement plan withdrawals.
Of course, the tricky thing about Social Security is figuring out when to start taking benefits. Signing up at full retirement age (FRA) means you can collect your monthly benefits without a reduction. However, the Social Security Administration (SSA) dangles a carrot by making those benefits available as early as age 62, albeit at a reduced rate. And, not surprisingly, many beneficiaries opt to claim Social Security as soon as they are eligible.
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On the flipside, the SSA rewards filers for being patient. Waiting beyond full retirement age to claim Social Security results in delayed retirement credits, which are worth 8% per year. Put another way, someone with a full retirement age of 67 who’s entitled to $2,000 a month at that time can grow their monthly benefit to $2,160 by waiting an extra year.
That incentive, however, eventually runs out. Come age 70, you don’t get credit for delaying Social Security, which is why it’s generally considered the “latest” age to sign up.
But what if your 70th birthday has come and gone, and you still haven’t claimed Social Security? It’s a situation you’ll want to rectify right away to avoid losing money.
Waiting only pays up to a point
One big misconception about how Social Security works is that if you don’t end up filing by age 70, you’ll be signed up to get benefits automatically, since there’s no financial incentive to have you hold off beyond that point. But Andrew Matz, Financial Planner at Oak Road Wealth Management, says, “The Social Security Administration will not automatically start sending you checks when you turn 70. You must file an application to start getting the money you've earned.”
In this situation, Matz’s advice is to file for Social Security as soon as possible. However, all may not be lost.
As Matz explains, Social Security will pay up to six months of retroactive benefits in a lump sum. So, if you realize your mistake before turning 70 and a half, you may not end up forfeiting any money.
However, he says, in general, “Waiting past age 70 is a mistake, because you're only leaving money on the table.”
Matz also explains that retroactive payments from Social Security may be applicable to six months of spousal benefits. But those benefits come with a whole different set of rules.
“For spousal benefits, you should file no later than your full retirement age, because there are no delayed retirement credits,” he says. “Delaying until age 70 would cost you money in this case. By filing at your full retirement age, you can receive up to 50% of your spouse’s benefit based on their full retirement age.”
The rules apply even if you're still working
You might assume that if you’re still working at age 70, then it pays to wait on Social Security since you don’t need the money or, worse yet, might get penalized for claiming your benefits and double dipping, so to speak. But Brandon Wellman, Financial Advisor at Prudential Financial, says the rules are the rules whether you’re working or not — there’s no financial upside to delaying Social Security past age 70, period.
Not only that, but there’s no need to worry about a penalty on the part of the SSA if you’re filing for benefits at 70 while still working. If you work and receive benefits prior to reaching full retirement age, you’re subject to an earnings test where having too high an income could result in having benefits withheld. However, once full retirement age is reached, that risk disappears.
Furthermore, Wellman says, people who are still working past age 70 “may even be able to increase their benefit amount if their earned income is high enough.”
As he explains, the SSA looks at your highest 35 years of earnings to determine what monthly benefit you get. If you earn high enough wages after claiming benefits, you can replace a year of lower earnings with higher earnings, resulting in a boost to your monthly checks.
Take action as soon as possible
After paying into Social Security your entire life, you deserve all of the money you’re entitled to from it. So if you didn’t get around to claiming benefits by your 70th birthday, create an account on SSA.gov and sign up immediately. You can also contact the SSA by phone at 1-800-772-1213 to claim your benefits or file in person at a Social Security office near you.
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