When planning for retirement, one of the most important decisions you’ll make is when to start claiming your Social Security benefits. While many people begin collecting benefits as soon as they become eligible at age 62, many financial experts suggest a more strategic approach—waiting until age 70. This strategy, commonly referred to as the “eight-year rule,” could increase your monthly income by hundreds of dollars for the rest of your life.
Although the “eight-year rule” isn’t an official Social Security term, it’s widely used among retirement planners to describe the period from age 62 to 70—the critical time window where your benefits can grow the most.
Why Waiting Until Age 70 Makes a Difference
Social Security offers flexibility in choosing when to begin receiving payments, but the longer you wait (up to age 70), the larger your monthly benefit becomes. This is because of delayed retirement credits. For every year you delay your claim past your full retirement age (FRA), your monthly benefit can increase by roughly 8%.
Full Retirement Age (FRA): FRA varies based on your birth year, but it typically falls between 66 and 67 for today’s retirees.
Claiming at 62: If you choose to claim benefits at 62, you could face a reduction of up to 30% compared to what you would receive at your FRA.
Delaying Until 70: By waiting until age 70, your benefit could be as much as 32% higher than it would be at your FRA, depending on your birth year.
Example of How the Eight-Year Rule Affects Your Monthly Income
Let’s consider an example to illustrate the impact of delaying your Social Security claim:
Full Retirement Benefit at FRA: Imagine your full retirement benefit at your FRA is $2,000 per month.
Claiming at Age 62: If you start collecting benefits at 62, your monthly payment might drop to about $1,400, a 30% reduction.
Claiming at Age 70: However, if you wait until 70 to claim, your monthly benefit could increase to approximately $2,480, a 24% increase compared to the FRA amount.
Over a 20-year retirement, that extra $480 per month adds up to more than $250,000 in additional income.
Who Benefits from the Eight-Year Rule?
For many people, particularly those in good health or with a family history of longevity, waiting until age 70 to begin claiming Social Security benefits can be a highly financially advantageous strategy. This approach not only maximizes your monthly income but also increases survivor benefits for a spouse. Survivor benefits are typically based on the deceased spouse’s benefit, so if one partner delays their claim, the surviving spouse could receive a larger benefit after the other’s death.
When the Eight-Year Rule Might Not Work for You
While the eight-year strategy has clear financial benefits, it’s not always the right choice for everyone. Here are some situations when claiming benefits earlier might make more sense:
Immediate Financial Need: If you face a job loss, health issues, or lack sufficient savings, you might need to claim Social Security earlier to meet immediate income needs.
Desire for Early Retirement: Some people prefer to retire earlier and begin collecting their benefits while they are still active and able to enjoy retirement.
Health Concerns: If you have health issues that might shorten your lifespan, you may choose to begin claiming earlier to maximize benefits during your lifetime.
Key Takeaways
Eight-Year Rule: Waiting until age 70 to claim Social Security can significantly increase your benefits, potentially adding hundreds of dollars per month.
Delayed Retirement Credits: Each year you wait after your full retirement age (up to age 70) can increase your benefit by 8%.
Strategic Decision: This approach works well for those in good health and with a family history of longevity, and for couples looking to maximize survivor benefits.
Consider Your Personal Situation: If you need the income sooner or want to retire earlier, starting benefits earlier may be the right choice, but be aware of the trade-offs.
The eight-year Social Security rule can significantly boost your retirement income, especially if you have the financial flexibility to wait until age 70. By understanding how delayed retirement credits work, you can make a more informed decision that aligns with your financial goals and life circumstances. However, if you need the income earlier, claiming at 62 or another age might be the better choice for you. It’s all about balancing your immediate needs with long-term financial security.
