If you’ve explored your options for claiming Social Security retirement benefits, then you know that full retirement age — the age at which filing will result in receiving 100% of intended benefits — is 67 years for anyone born in or after 1960. Of course, if you’re willing to accept smaller payments, you can claim as soon as you’re 62. Conversely, waiting until you turn 70 to file results in a bigger monthly benefits payment than filing at 67.
If you’ve done the math and still can’t decide, however, there are other factors worth considering. Here are the top three reasons you might not want to claim Social Security retirement benefits when you turn 67, even though you can.
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1. You’ll increase your eventual benefits payment
The first reason is also the best one. That’s the payment bump for delaying your benefits. For every month you wait, you’ll add 0.66% to the payment you would have received if you’d claimed at full retirement age. That’s an additional 8% per year.
Just don’t wait too long. This credit stops being added once you turn 70, when your benefit is 24% more than your payment would have been if you’d claimed at 67.
2. Waiting to file boosts your spouse’s survivor benefits, too
It’s not just your Social Security benefit that gets bigger the longer you wait to claim it. If you’re married and have a history of more taxable income than your spouse (and are therefore due more Social Security retirement benefits), your spouse will also see a comparable increase in his or her survivors benefits payment if you die first.
Surviving spouse rules can get a bit complicated. So you’ll want to check with the Social Security Administration for all the options in your particular situation.
3. You might reduce your current tax liability
Finally, there are tax matters to consider before initiating your Social Security benefits.
The biggest one is the possibility that Social Security income could push you into a higher tax bracket if you’re also earning work-based wages or withdrawing money from an ordinary retirement account at the same time you’re receiving benefits. For this year, if you’re an individual filer with reported taxable income of less than $25,000, none of your Social Security income is federally taxed. If you report income of between $25,000 and $34,000, however, up to half of your Social Security income is subject to taxation. And if you’re going to report a total income of more than $34,000, up to 85% of your Social Security income could be federally taxed. Those thresholds are raised to less than $32,000, $32,000 to $44,000, and more than $44,000 (respectively) for married joint filers.
It may not matter much. If you’re still making a good work-based income at the age of 67 and don’t really need your Social Security benefits yet, though, delaying them potentially keeps your tax bill down until your employment wages are no longer part of the calculation.
Postponing these payments also gives you a chance to tax-efficiently convert your ordinary IRA to a Roth IRA.
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