Can Claiming Social Security at 70 Take the Place of Retirement Savings?

It’s important to save for retirement so you have enough money for a comfortable lifestyle once you stop working. Unfortunately, though, many people find it difficult to save for retirement and end up closing out their careers with little to no money socked away.

If you’re struggling to fund a retirement account, you may be planning to delay your Social Security claim for larger monthly checks. The idea is that getting more Social Security could be enough to compensate for not having money in an IRA or 401(k).

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It’s a good idea in theory. But there’s a flaw in that plan.

Why delaying Social Security won’t cut it

You’re allowed to sign up for Social Security at any point once you turn 62. You’re eligible for your monthly benefits without a reduction once you reach full retirement age, which is 67 for anyone born in 1960 or later.

However, you’ll be rewarded for delaying your Social Security claim past full retirement age. For each year you do, up until you turn 70, your Social Security benefits get an 8% boost.

That could amount to a lot more retirement income. But it may not be enough to make up for a lack of savings.

As a general rule of thumb, retirees should expect to need 70% to 80% of their former income once they stop working. But will a delayed Social Security claim get you to that point? Let’s find out.

Imagine you’re used to living on $60,000 a year and are eligible for $2,000 a month, or $24,000 a year, in Social Security if you file for benefits at full retirement age. That gives you 40% replacement income.

If you delay your Social Security claim until age 70, you’ll boost your monthly benefits to $2,480 and have $29,760 a year in retirement income. That means claiming at 70 will allow Social Security to replace about 50% of your old $60,000 salary.

But you’ll notice you’re still not replacing anywhere close to 70% to 80% of your pre-retirement salary. If you don’t want to have to cut too many corners, the lower end of that range is probably what you should be aiming for.

That’s why claiming Social Security at 70 isn’t enough to compensate for not having savings. Though larger benefits each month will help, you may still be looking at a serious income shortfall.

Try your best to save something for retirement

When you have bills mounting and endless expenses, it can be very hard to save for retirement. But if you don’t manage to bring savings into your senior years, you may be forced to cut back on spending to a large degree, making retirement a lot less enjoyable.

If you’ve been struggling to save for retirement, start small. Begin setting aside $25 a month in an IRA or 401(k) and see where that goes.

It’s also a good idea to try to save enough in a 401(k) plan to claim your employer match in full. That match represents free money for your retirement. If you snag it, you can grow your savings more easily.

Another thing worth doing is seeing if you can boost your income by working a side gig a few hours a week. Not only might the extra money make it possible to fund a retirement account, but if you add to your wages, you may be eligible for a larger Social Security benefit once you retire.

Filing for Social Security at 70 could certainly give you a lot more money each month for life, and therefore give you a lot more options. Just don’t assume that delaying your claim until 70 can take the place of having savings. It can help, but it may not provide the income you need to truly live your best life.