A growing number of retirees are claiming Social Security at 70. Here’s why.

One of the most important decisions about your retirement finances is the age at which you claim Social Security.

Most people become eligible for pension benefits from the age of 62. But applying as soon as possible comes with the downside of a reduced benefit. To get the biggest Social Security check possible, most retirees have to wait until age 70 to claim. And more and more seniors have decided it’s worth the wait.

The percentage of seniors waiting until age 70 to start collecting benefits has increased dramatically since the turn of this century. There’s a clear reason, and it should become an even more attractive option over the next few years.

Here’s what seniors need to know.

The big change in claiming ages

Over the past 25 years, there has been a significant increase in the number of seniors delaying Social Security until age 70, with the trend accelerating over the past 15 years or so. Only 0.8 percent of men and 1.6 percent of women who claimed Social Security in 2009 were 70 or older. By 2022, those percentages have risen to 8.1% and 8.8%, respectively.

But the big change in age claims predates the turn of the century. It goes back to 1983, when Congress passed major Social Security reforms.

There were two key parts of the reforms that changed the behavior of retirees. First, there was the gradual increase in the full retirement age from 65 to 67. Anyone born before 1938 will still receive the full benefit at age 65, but the full retirement age will increase by 2 months for each year someone was born after 1938 until reaching age 66 for anyone born in 1943 or later.

A second tranche of raises would begin to kick in for people born after 1954, rising again 2 months a year to 67 for those born in 1960 or later.

One of the effects of raising the retirement age was a greater penalty for claiming at 62. While those with a full retirement age of 65 would receive 80% of their normal benefit if they claimed at 62, those with a full retirement age of 62. 67 who claimed at age 62 would receive only 70% of their normal benefit.

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Another effect is that retirees have fewer years to collect delayed retirement credits, which increases the benefits of delaying past full retirement age until age 70. To balance the impact, the reforms also included an increase in the amount of the deferred retirement credit.

Previously, retirees could increase their benefit by 3% per year for up to 5 years (from 65 to 70). This gave them a maximum of 115% of the benefit they would receive at age 65. The 1983 reforms gradually increased the deferred retirement credit to 8% per year. This gave those born between 1943 and 1954 the opportunity to receive up to 132% of their full benefit.

Stimulating a Social Security delay

The changes gave retirees clear incentives to wait longer to claim benefits. Previously, you could receive 80% of your benefit from age 62. That would only grow to 115% at age 70, a 44% increase in the value of your check for an eight-year wait.

For those considering retirement claims at the start of the 21st century, however, they had to decide between 75% of their full benefit in 1999 or 132% of the value in eight years, a 76% increase.

There’s another change happening right now with the second tranche of increases to full retirement age, though it’s not as big a jump. Seniors who turn 62 in 2024 have a full retirement age of 67. This means they are only eligible for 70% of their full retirement benefit if they claim this year. If they wait until they turn 70, they will receive 124% of their full benefit, a 77% increase. As such, the incentives to wait are increasing.

Another factor pushing seniors to wait

In addition to the increased financial incentives for delaying Social Security, waiting until age 70 makes more sense for more people each year. That’s because the average life expectancy of seniors continues to improve.

The biggest factor in whether you should claim benefits early or late is how long you expect to live. If you have health problems that threaten your life expectancy, it usually makes sense to claim earlier. If you’re in better-than-average health, you’ll get more from Social Security over your lifetime if you wait longer to claim benefits.

While the dynamics are more complex for couples, it usually makes sense for the higher-earning spouse to wait until age 70. If the higher-earning spouse dies, the partner can receive survivor benefits. They can increase the surviving spouse’s monthly check to match the higher of the two spouses’ initial benefits.

Given the growing incentives to defer benefits and the increased odds of living long enough to delay long-term payouts, it shouldn’t be a surprise to see more and more seniors waiting until age 70 years to claim social security. Most readers will be best off joining this growing group.