Overview: It can be tempting to begin taking Social Security benefits the moment you are eligible. The following discusses some reasons why you may want to delay taking your benefits.

You’re ready to retire and have paid a lot into the Social Security system. But now that you’re finally eligible for benefits, you might be hearing your advisor and other experts say, “Not yet!” Why should you have to wait any longer?

Reductions and Credits
First of all, if you apply prior to your full retirement age (FRA), you will receive a reduction in your benefits. For example, if your FRA is 66 and your full benefit is $1,000 a month, then you will receive $1,000 month if you claim at 66. However, if you claim at age 62, that benefit is reduced by 25 percent to $750 per month.

On the other hand, you will receive delayed retirement credits for every year you delay taking benefits after your FRA. For individuals with an FRA of 66, this means an 8 percent increase each year. So by delaying to age 70 (or the age at which you would receive the maximum benefit), you would receive a 32 percent increase over your full benefit. Using the example above, you would now be entitled to $1,320 per month ($1,000 x 132 percent) for the rest of your life.

Finally, claiming early doesn’t give you any additional benefit, provided you have an average life expectancy. Regardless of your claiming age, your benefits are calculated so you’ll receive the same total benefit as long as you live to your average life expectancy. So if there is any chance you might live longer than average, delaying benefits is like buying longevity insurance — something to protect you from outliving your assets.

It’s Not Just About You
If you take $1,320 at age 70 instead of $750 at age 62, you’ll have to live to age 80 to make that decision worthwhile. So maybe you don’t think you’ll live that long and choose to claim early. But if you’re married and claim early, you could be reducing your spouse’s benefit as well.

That’s because if your benefit is higher, your spouse receives your benefit in the form of a survivor’s benefit should he or she outlive you. For example, if your spouse outlives you by five years, the survivor benefit would be $45,000 (if you claimed at 62) versus $79,200 (if you claimed at 70), which is equal to a 76 percent increase.

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