It’s no secret that retirement planning is difficult, especially as costs continue to rise. Healthcare expenses alone could cost the average 65-year-old around $165,000 out of pocket, according to a 2024 report from Fidelity Investments, with housing and everyday expenses also adding up quickly.
For that reason, most older adults will need to maximize their income however they can. Social Security can go a long way, but having the right strategy is crucial. If you plan to rely on your benefits in retirement, popular financial advisor Suze Orman has some important advice.
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Use your age to your advantage
In a newsletter released in late 2024, Suze Orman discusses some of the pitfalls of retirement planning in America — especially for those who don’t have many income sources outside of Social Security.
“[S]o few workers are covered by traditional pensions that provide guaranteed income in retirement,” she explains. “Another issue is the poorly constructed 401(k)/403(b) system, which is full of so many potholes that are easy to trip up on.”
If you don’t have a solid nest egg to fund retirement, you may end up heavily relying on Social Security. While it isn’t necessarily a bad thing to depend on your benefits, the system can be confusing at times. Not everyone knows how to maximize their monthly checks, especially when choosing a claiming age.
Orman goes on to say that “it is so smart for anyone in good health in their 60s to wait as long as possible to start receiving their Social Security retirement benefit.” Although you can file as early as age 62, delaying benefits up to age 70 can make retirement far more affordable for those who don’t have many other income sources.
Boost your benefits by hundreds of dollars per month
When choosing a Social Security start date, the first figure you’ll need to know is your full retirement age (FRA). This is between ages 66 and 67, depending on your birth year, and filing at this age will earn you 100% of your benefit based on your work history.
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By filing earlier than your FRA, your payments will be reduced by up to 30% per month. If you delay until age 70, though, you’ll receive your full benefit along with an additional 24% to 32% per month.
Say, for example, you have an FRA of 67 years old, and you’d collect $2,000 per month by filing at that age. If you were to claim at 62, you’d face a 30% reduction — leaving you with $1,400 per month. By waiting until 70 to file, though, you’d collect your full $2,000 per month plus a 24% bonus — for a total of $2,480 per month.
In other words, in this scenario, the difference between filing at 62 and 70 would amount to a whopping $1,080 per month. If you’re going to be depending heavily on Social Security in retirement, that extra cash could be a game-changer.
Why your health should factor into this decision
There’s a reason why Orman specifically mentioned that those in good health in their early 60s should consider delaying benefits, because your health and life expectancy should play a part in deciding when to file for Social Security.
If you’re in your late 50s or early 60s and you’re battling health issues or have reason to believe you may not live well into your 70s, it may not make sense to delay benefits. Each check will be larger once you eventually file, but if you only have a few years to enjoy that money, delaying might not be worth it.
Nobody knows precisely how long they’ll live, of course, and this isn’t the most pleasant part of retirement planning. But when you have a rough idea of how many years you might spend in retirement, you can make the best claiming decision to maximize your lifetime income.
Delaying Social Security could boost your payments by hundreds of dollars per month, but there’s no one-size-fits-all approach when deciding on an age to file. By considering your financial goals and health expectations, you can make the best choice for your retirement.
