If you collect Social Security before full retirement age (FRA), you get benefit payments immediately. If you wait until you're 70, it's years before the bigger benefit you'll receive surpasses what you'd have collected by starting early. And if you die before you're 70, nobody gets any of that extra money.
You're mistaken. A surviving spouse gets that extra money. Let's say your FRA is 66, but you postpone Social Security, and die at 69 before applying for it. Your surviving spouse gets the benefit you were entitled to when you died at 69, which would be 24% bigger than your FRA benefit.
But you're right that postponing Social Security involves a trade-off. Whether the trade-off makes sense depends on your financial situation, health, family longevity and marital status.
If your FRA is 66 and you apply at 62, you get only 75% of your FRA benefit. If you apply at 65, you get 93.3%. If you can afford to wait until you're 70, you'll miss four years of smaller payments, but you'll get 132% of the amount you'd have received at 66. How long will it take that bigger benefit to exceed the earlier benefit you passed up? The rule-of-thumb is that if you start Social Security at 66 instead of 62, you'll break even at about 78. Take it at 70 instead of 66, and you'll break even at about 82.
But you and/or your spouse may live much longer. A healthy 65-year-old couple now have a 44% chance that one spouse will live to be 90 — and a 25% chance that one will live to be 95.
The bottom line
The main reason to postpone Social Security isn't a bigger starting benefit. It's that the delay gives you a substantially bigger benefit in your 80s and 90s.
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