3 Reasons to Delay Taking Social Security

There's a reason 62 is the most popular age for eligible recipients to file for Social Security: It's the earliest possible age to collect benefits. But if you're willing to exercise patience and delay those payments, you could end up with a lot more money on your hands.

Your Social Security benefits themselves are based on your 35 highest years of earnings. If you wait until your full retirement age -- which will either be 66, 67, or 66 and a number of months -- to file, you'll collect your monthly benefit payments in full. But if you file prior to full retirement age, you'll reduce your benefits by a certain percentage for each year you file early.

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There's also a flip side. If you hold off on filing for benefits past full retirement age, you'll snag an 8% increase in payments each year up until you turn 70. And it's this very fact that should serve as motivation to wait, especially if any of the following scenarios apply to you.

1. You have little to no savings

Social Security isn't designed to serve as retirees' sole source of income, but rather, as a means of supplementing their savings. Yet a frightening number of older Americans have virtually nothing set aside for the future. In fact, the median savings balance among households aged 56 to 61 is a rather appalling $17,000. If we apply a 4% annual withdrawal rate to that balance (which is the rate that's long been the standard), that leaves us with less than $700 worth of income per year.

If you're in a similar boat, and are counting on Social Security to provide the bulk of your retirement income, then it absolutely pays to wait and boost your benefits to the greatest extent possible. Otherwise, you'll be even more likely to struggle with your bills as a senior.

2. Your health is fantastic

Earlier, we talked about how the age at which you claim Social Security could impact your benefits. But here's the interesting thing about Social Security: It's actually designed to pay you the same total lifetime benefit regardless of when you initially file. The logic is that any reduction in benefits you face by filing earlier will be offset by the greater number of individual payments you collect. Similarly, while waiting on benefits will cause them to increase, you'll collect fewer individual payments in your lifetime.

This formula, however, makes one major assumption: that you live an average life expectancy. But if your health is great, and you end up living well past the average for someone your age, then you'll come out way ahead by delaying benefits.

Here's an example. Say your full retirement age is 67, at which point you're eligible for $1,500 a month in benefits. If you hold off until 70, you'll boost each payment to $1,860, but you'll collect 36 fewer payments. If you end up living until 82 1/2, you'll wind up with the same exact total in either scenario. But if you live until 87 1/2, you'll come out $21,600 ahead by virtue of having waited to take benefits at 70.

That's why it pays to take your health into account when deciding when to file for Social Security. If you live a long life, delaying benefits could pay off in a very big way.

3. You have a spouse to think about

If you're single and are trying to decide when to take benefits, the only things you really need to consider are your savings level and personal health. But if you have a spouse to worry about, that changes the picture entirely. If you end up passing away well before your spouse, leaving him or her to rely on survivor benefits, then the longer you wait to file for Social Security, the more money your spouse stands to collect. That's because those survivor benefits will be directly tied to the amount you wind up collecting.

So imagine your health isn't great and you're therefore contemplating filing for benefits early to get the highest possible payout in your lifetime. If you're single, that's a smart way to think. But if you have a spouse who's likely to need those benefits for another 15 or 20 years after you pass, then it might actually pay to wait.

Though there are certain situations where it makes sense to claim Social Security right away, there are also plenty of instances where waiting is the best way to go. Think about your savings level, your health, and the other people in your life who may be depending on those benefits before you make the call one way or another.

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