10 Reasons to Claim Social Security Before 70

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1. Health Issues

One reason your client might consider claiming before age 70 is if they are in poor health. They may be facing a reduced life expectancy, and claiming at an earlier age can help them maximize their lifetime benefits. Claiming earlier than 70 can also help them with expenses related to their health condition.

While nobody can accurately predict their life expectancy, clients with serious health conditions might reasonably expect to have a reduced life expectancy. Claiming their Social Security benefits early can help them maximize their benefits during their lifetime.

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2. Claiming Survivor Benefits

Widows or widowers can take their survivor benefits as early as age 60, or earlier if they are caring for a minor or disabled child of their late spouse. If the surviving spouse has reached their full retirement age (FRA), they can claim 100% of their deceased spouse’s benefit, though that benefit amount will be reduced if the deceased spouse had claimed their benefit prior to reaching their FRA.

Another option is for the surviving spouse to claim their survivor benefit as early as age 60, then convert to their own benefit (if it is higher) as early as age 62 or as late as age 70. This can provide an initial stream of income that can be converted to a higher level later on.

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3. Maximizing Married Couples' Benefits

One common claiming strategy for married couples is to have the higher-earning spouse wait until age 70, or as long as possible, to claim their benefit. This ensures that their spouse will receive the highest possible survivor benefit should the higher-earning spouse die first.

It can often make sense for the spouse with the lower benefit to claim their benefit prior to age 70 in order to provide an income stream earlier in retirement. Even though their benefit will be reduced, the couple has ensured that the spouse with the lower benefit will receive the maximum survivor benefit if needed.

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4. Deferring Taxes on Retirement Savings

In some cases, your client might benefit from claiming their Social Security benefits prior to age 70 in order to delay tapping their retirement accounts. There may be a number of reasons for this, including deferring taxes on money in retirement accounts or allowing their investments to continue to grow tax-deferred.

If the client is still working, it is probably best that they wait to claim their benefits until they reach their FRA to avoid the benefit reductions that can accompany earned income prior to their FRA.

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5. Preserving Inheritance for Beneficiaries

Allowing investments to grow might be a consideration for clients concerned about leaving a larger inheritance. Claiming Social Security early can allow them to let these investments continue to grow.

This might be a consideration for clients with a variety of estate planning situations — perhaps a client with children or other family members as their beneficiaries.

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6. Cash Flow Needs

Those entering retirement have varying cash flow needs. Taking Social Security benefits early can help solve these. For example, your client may be eligible for a pension where it is advantageous to wait for a few years to commence taking payments.

Taking Social Security benefits early can provide cash flow that offers your client planning flexibility during their early retirement years.

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7. Taking Spousal Benefits

For those who do not qualify for a benefit on their own, or whose own benefit level is quite low, a spousal benefit is a good option, if applicable. To qualify for a benefit based on a spouse’s earnings record, that spouse must already be taking their own benefit.

In a situation where the spouse with the higher benefit level is the younger spouse, it can make sense for them to claim their benefit before age 70 to allow the older spouse to claim a spousal benefit.

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8. Investing For a Greater Return

You may have a client who doesn’t need their benefit to cover their normal living expenses and who would like to invest the money from their Social Security benefit. They might consider commencing their benefit early and investing the money each month in order to accumulate additional assets for retirement or to leave to their beneficiaries upon their death.

Their lower monthly benefit level can potentially be offset by the ability to invest these amounts each month over a longer time period. Each client situation is different, and if this is an option for one of your clients, it's important to show them the pros and cons of this approach.

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9. Private Health Insurance Payments

For clients who retire before they are eligible for Medicare, Social Security benefits can help cover the cost of health insurance in the gap period. Private health insurance can be costly, and there may also be out-of-pocket medical costs to cover during this period.

Claiming Social Security early can help clients offset these potentially high costs early in retirement and help preserve other retirement assets.

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10. Retiring Into a Down Market

For clients who find themselves retiring into a down market environment, claiming Social Security prior to age 70 can allow them to use these benefits for some or all of their retirement spending needs in lieu of withdrawing money from retirement and investment accounts whose value has been depressed due to the decline in the markets.

The reduced retirement account withdrawals during this period allow the investments in these accounts the time to recover as markets recover. This can help rebuild the value of the client’s retirement nest egg, allowing their money to last longer.

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1. Health Issues

2. Claiming Survivor Benefits

3. Maximizing Married Couples' Benefits

4. Deferring Taxes on Retirement Savings

5. Preserving Inheritance for Beneficiaries

6. Cash Flow Needs

7. Taking Spousal Benefits

8. Investing For a Greater Return

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10 Reasons to Claim Social Security Before 70

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Related: 8 Reasons to Avoid a Roth Conversion

More on this topic

1. Health Issues

2. Claiming Survivor Benefits

3. Maximizing Married Couples' Benefits

4. Deferring Taxes on Retirement Savings

5. Preserving Inheritance for Beneficiaries

6. Cash Flow Needs

7. Taking Spousal Benefits

8. Investing For a Greater Return

9. Private Health Insurance Payments

10. Retiring Into a Down Market

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