Why Waiting 8 Years Could Be the Best Money Move for Retirement

When it comes to retirement planning, one of the most important decisions that you’ll have to make involves when you’re going to start claiming Social Security Benefits. While many people start drawing their benefits at 62, waiting until you’re 70 can lead to significantly higher monthly checks. This is known as the 8-Year Rule of Social Security.

According to a study published by the Transamerica Center for Retirement Studies, 91% of retirees rely on Social Security. If you’re thinking about how to fund your retirement, you need to know how to maximize Social Security, and utilizing the 8-Year Rule is the way to do that.

What Is the 8-Year Rule of Social Security?

The 8-Year Rule refers to the period between the earliest age at which you can begin collecting Social Security and the age at which you can maximize Social Security. You’re eligible for Social Security at 62, but if you delay accessing those funds for eight years, you can significantly increase the amount that you collect.

For every year that delay past your full retirement age, which is usually 66 or 67, depending on the year that you were born, your benefits increase by 8% per year, thanks to delayed retirement credits. Those credits can add up to a 76% higher monthly payment by age 70 compared to starting at 62.

This isn’t just a financial bonus. It’s a strategic way to make sure that you have some financial stability later in life. Since Social Security payments are guaranteed and inflation-adjusted, maximizing Social Security provides a lifelong income stream that grows over time.

For retirees who live into their 80s or 90s, that delay can mean tens of thousands of dollars in additional benefits.

Why Do So Many Claim Early?

If you can increase your retirement income by such a large amount by waiting until you’re 70, why do so many people keep collecting their Social Security benefits before that age? Wouldn’t it make sense for everyone to wait until they get to 70 years of age to access that money?

Of course, it would. However, there are plenty of valid reasons for people to start collecting Social Security benefits before they turn 70.

Many people start collecting benefits early because they have worries about the program’s long-term stability. Others don’t wait until they’re 70 because they simply don’t have that option. If you’re 62 and need immediate income, you may not be able to take advantage of the 8-year rule. Still, there are some recipients who simply don’t know that they can collect so much more money by waiting.

It's also common for people to underestimate their life expectancy. If you don’t assume that you’re going to live into your late 70s or longer, you may not see the need to wait to collect the money that you’ve been paying into the system for years.

However, if you live longer than expected, you may find yourself leaving serious money on the table by not waiting for as long as possible.

How Much More Can You Get by Waiting?

If we’re really going to understand the importance of waiting on your Social Security benefits, we need to look at some numbers.

Hypothetically, let’s assume that your full retirement age is 67, and you are eligible to collect $2,000 per month at that time. If you start claiming your Social Security at 62, your benefit would be reduced by roughly 30%, which means you would receive around $1,400 per month for life.

However, if you wait until you turn 70, your benefits would increase by 24%, bringing your monthly check to $2,480 per month. That’s an extra $1,080 per month compared to starting at 62. Over the course of 20 years of retirement, that adds up to more than $250,000 of additional income, not accounting for inflation.

Who Benefits Most From Delaying?

Waiting until you’re 70 years old isn’t the right option for everyone. It may sound strange to say that after we’ve looked at the numbers, but the fact remains that some people are better served by not putting off their Social Security benefits.

For instance, if you’re in poor health or have a shortened life expectancy, claiming early could be the smarter move. However, if you’re in good health or have a family history of longevity, delaying can offer incredible value.

According to studies, single women live longer than any other group, so if you’re a single female, you are a prime candidate for waiting until you’re 70 to start collecting your Social Security. Married couples can often maximize benefits by working together to coordinate their claiming strategies.

For example, one spouse might claim earlier while the higher earner delays to maximize the survivor benefit in the future. By taking a strategic approach, both you and your spouse can enjoy a better quality of life while enjoying retirement.

Delaying Pays Off, If You Can Wait

Putting off your reliance on Social Security is one of the most responsible financial decisions that you can make. The financial benefits associated with waiting until you’re 70 years old can have a drastic impact on the quality of life that you enjoy when your working days are behind you.

Of course, it’s just not possible for some people to wait, but if you have the chance to do so, delay Social Security payments.