O50 years ago, preschoolers at Stanford’s Bing Nursery School had a choice. They could either eat a marshmallow immediately or wait 20 minutes and get two marshmallows. The children were then followed for decades. Those who waited fared better in several ways, including higher SAT scores and improved self-esteem.
American adults nearing retirement face their own version of the marshmallow test. They can apply for early benefits at age 62. They can wait until full retirement age. Or they can wait up to 70 years. The longer the wait, the higher the benefits.
It may seem obvious to push back as long as possible. But do you really have to wait 70 years to claim Social Security benefits? Here’s what the stats show.
The advantage of waiting
Assume you have consistently reached the maximum Social Security benefit level throughout your career and elected to claim your benefits at age 62 in January 2022. Your monthly retirement benefit would be $2,364, according to the Social Security Security Administration (SSA).
Now suppose you waited until you were 67 to claim benefits. Your monthly check would increase to $3,568. However, if you choose to delay applying for Social Security benefits until age 70, you will receive a whopping $4,194 per month.
It’s not as important as preschoolers get twice as many marshmallows by waiting 20 minutes. However, there is clearly a financial benefit to delaying when you apply for Social Security retirement benefits.
Your monthly check will be almost 51% higher if you wait until age 67 to claim Social Security benefits compared to age 62. If you wait until age 70, your monthly check will be more than 17.5% higher than claiming benefits at age 67. .
Why statistics work against delays
So is it wise to delay until age 70 to claim Social Security benefits? Not based on statistics. It is true that you will receive a higher monthly check if you wait. However, it is important to look at what your cumulative benefits will be.
The chart above shows the cumulative benefits by age for applying for Social Security at ages 62, 67, and 70. Note that the calculations use the previously mentioned maximum Social Security benefit amounts.
At age 76, the accrued benefits for a claim at age 67 will exceed those for a claim at age 62. At age 87, the accrued benefits for a claim at age 72 will exceed those for a claim at age 67.
Now, arguably the most important stats. The average life expectancy for men in the United States is 75 years. She is 81 for women. Statistically, most Americans are not better to wait until age 70 to claim social security benefits, because they won’t live long enough to pay off.
We also did not take into account the time value of money. Even if you didn’t need Social Security benefits at age 67, you could claim them and invest the money in a low-risk alternative like treasury bonds. This would push back the time it would take to justify delaying the application for benefits even further.
You are not a statistic
Does this analysis absolutely mean that you should not wait to claim Social Security benefits? No. You are not a statistic.
You could enjoy a much longer life than the average life expectancy. It’s possible that you could reap significantly more total Social Security benefits by waiting to claim benefits than you would by claiming benefits at an earlier age.
Whatever you decide, go ahead and eat some marshmallows if you want. There is no psychologist watching.
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