The Social Security Sweet Spot

This week is national save for retirement week, and there's some good news. While more and more people are planning to push off retirement past the traditional age of 65, it turns out that is to their benefit.

This week is national save for retirement week, and there’s some good news. While more and more people are planning to push off retirement, it turns out that might be to their benefit.

More than half of Americans surveyed by Swiss Re anticipate they will work beyond 65 or never even retire at all.

“Americans are starting to recognize that living longer will require a shift in retirement planning,” George Graziani, Head of Longevity North America for Swiss Re said in a statement.For many Americans surveyed, 70 is the new 65.”

The good news, though, is age 70 may actually be the ideal age to retire. According to MarketWatch, “monthly benefits are highest at age 70 and are reduced actuarially for each year they are claimed before age 70.”

The monthly payments are lowered based on average life expectancy and the assumption that they will be paid for more years, according to Alice Munnell. So why is age 70 the sweet spot?

“If you claim after 70, lifetime benefits decline, because monthly benefits are not increased for claiming after 70. If you claim before 70, your monthly benefit is significantly lower.”

Unfortunately, most people don’t realize that claiming early reduces their monthly benefits. In fact, claiming retirement benefits early is one of the five biggest retirement saving sins.

A 2012 AARP study revealed that Americans mostly aren’t aware there are different claiming strategies when it comes to Social Security benefits. Less than a third actually knew to wait until age 70 while 19% thought they could receive the maximum monthly benefits before they even reached full retirement age.

“When and how to claim Social Security retirement benefits can be a complex decision, and is different for everyone,” Jean Setzfand, AARP vice president for financial security, had said in a statement at the time. “This survey shows us that people who are approaching retirement may be facing this decision without enough information to make the right choices for themselves and their families.”