Your decision to defer Social Security could backfire if this thing happens | Smart Change: Personal Finance

The monthly benefits you are entitled to during retirement are based on your salary over the 35 years with the highest salaries in the workforce. And then you are entitled to this benefit at your full retirement age, or FRA. FRA starts at 66, 67, or somewhere in between, depending on your birth year.

There is also an option to defer registration after the FRA. For every year you do, up to age 70, your benefits increase by 8%. And just to be clear, once you secure this top monthly benefit, you can enjoy it for life.

At first glance, delaying enrollment may seem like a surefire way to get the most money out of Social Security. But this decision may backfire on you in one specific situation.

The interesting thing about Social Security is that it is designed to pay you the same benefit regardless of whether you file early, on time or late. But that assumes that you eventually live to an average life. If you don’t, and you die sooner than your usual seniors, delaying your introduction will end up being a bad choice, as it will result in you getting more generous. monthly Benefit from Social Security, but less benefit for life.

So, let’s say you’re looking at $1,700 per month in benefits with an FRA of 67. If you delay enrollment until age 70, that benefit increases to $2,108. That’s a nice bump for sure.

But what if you end up only living to the age of 76? At this point, you would be looking at roughly $32,000 less Lifetime income by virtue of waiting to start collecting that money.

The tricky thing about signing up for Social Security is that you don’t have access to a crystal ball, which means you can’t predict how long you’ll live. In fact, you may end up in good health in your late 60s and delay presenting as a result, only then get sick in your early 70s and die shortly thereafter.

As such, delaying your Social Security claim is really a bit of a gamble. And if you have any notable health issues when you retire, that alone may be reason enough to enroll in the FRA (or even earlier) and not put off enrolling.

On the other hand, if you have a long-term family history, this may inspire you to postpone registration for as long as possible. And that wouldn’t be a bad choice at all.

Ultimately, delaying Social Security carries a certain degree of risk. But the upside can be huge if you end up living a long life. So you will have to weigh the pros against the cons to determine if delaying your benefits claim is worth taking.

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