Your benefits grow every month that you wait to claim Social Security. To many people, that sounds like motivation enough to hold off on Social Security -- who wouldn't want heftier payouts?
But it's not quite as simple as that. A growing body of research has shown that retirees are one of the happiest groups of people around. Once basic material necessities are met, retirees enjoy a sudden and sustainable boost in overall life satisfaction -- no matter their relative levels of wealth.
A look at what claiming Social Security now could do for you. Image source: Getty Images.
Because of this, I'm of the belief that the majority of Americans would be best off -- from a life satisfaction point of view -- by taking Social Security as soon as possible. Having said that, there are as many variables at play as there are retirees.
While this is far from a one-size-fits-all solution, I've tried to zero in on the three most important questions to help you determine if you should wait to claim Social Security benefits.
1. If you claimed benefits right now, could you meet your basic needs?
If you answered no...
If you won't be able to cover your basic needs -- food, housing, utilities, transportation, and healthcare -- then you would likely be better off waiting to claim Social Security.
Right now, the average Social Security monthly benefit is $1,369. Using that as a proxy for the average payout at age 62 -- which is the most popular age for claiming benefits -- here's how the payouts would increase over time, assuming you were born before 1955.
Numbers extrapolated from assumption of $1,369 monthly payout at age 62. All figures rounded to nearest $100. Chart by author.
If you're in a pinch, the extra $12,500 that comes with waiting until age 70 can be a huge difference. Not only that, but you can try to reduce expenses while you're working those extra years and invest that difference to give your nest egg further cushioning.
If you answered yes...
Then move onto the next question.
2. Will your spouse's financial needs be met after you pass away?
If you answered no...
There is a slew of confusing rules about how spousal Social Security benefits work when both partners are alive. We're not going to deal with them in this article, but you can read further on the topic here.
No matter what, if both partners are receiving benefits, once one partner passes away, total family Social Security benefits will fall. The remaining spouse will typically keep the higher of the two benefits -- either what he/she was previously receiving or the benefits of the deceased.