Why Suze Orman Believes Waiting Until Full Retirement Age for Social Security Isn’t Long Enough

If you were born in 1960 or later, your full retirement age for Social Security is age 67. Full retirement age is an important milestone to reach, because it is only when you reach FRA that you can claim your standard Social Security benefits without your monthly income being reduced by early-filing penalties. Any time you claim before FRA, even a single month, your Social Security checks will be smaller — and a very early claim could result in a 30% cut to your retirement income. 

Since you can claim Social Security as early as age 62, waiting until 67 may seem like a huge sacrifice. However, if you listen to finance expert Suze Orman, delaying for this five-year period of time is not enough. Orman actually believes that you should be waiting until the age of 70 — which would mean giving up a full eight years of retirement benefits that you are eligible to receive.

Here’s why Orman thinks you need to wait well beyond your full retirement age to collect your Social Security checks

Orman thinks waiting for Social Security beyond full retirement age is important for one key reason

According to a post on her website, Orman explained that waiting until the age of 70 will result in a “much bigger” payout — but despite that fact, just 10% of people have committed to waiting so long. Orman believes it’s a problem that so few people plan to wait, because life expectancy data shows that the majority of both men and women who have reached the age of 65 are likely to live long enough to benefit financially from a delayed claim.

Specifically, a woman who is 65, in average health, and a non-smoker has a 50% chance of being alive until at least 88, and a man with a similar health status has a 50% chance of still being alive at age 85. Living at least that long would mean that you would do more than break even from missing years of benefits by delaying Social Security until 70. The higher monthly income that comes from a delay would give you both more money each month and more lifetime Social Security benefits. 

The reason you’d end up collecting more is that you can earn delayed retirement credits once you have passed your full retirement age without claiming your benefits. Delayed retirement credits increase your monthly payment by 2/3 of 1%, which adds up to 8% annually. When the system of early filing penalties and delayed retirement credits was created, the goal was for both early and late claimers to get a roughly equal amount of benefits, with those claiming early collecting more checks for less money and those claiming late collecting fewer checks with larger payouts.

But, since life expectancies have changed over time, the odds are that you’ll outlive the point when you break even, thus ending up getting more out of the system you paid into. The fact that the odds are in your favor that a late claim will pay off for you is the big reason why Orman believes you should wait — especially because you don’t necessarily have to wait until you are 70 to retire. You can stop work sooner, live off savings, and then just claim retirement benefits later.

Should you follow Orman’s advice and wait until 70?

There are plenty of good reasons to follow Orman’s advice. Maxing out your guaranteed retirement income and giving yourself the best chance to end up with more lifetime income seems like the obvious choice. Of course, you also have to account for your goals for when you retire, your health situation, your marital status, and several other factors that could affect when you should claim benefits.

In order to make certain you’re making the right choice, you may want to consult with a financial advisor. Your advisor can help you evaluate the specifics of your situation to decide if waiting until 70 makes sense for you or if another strategy could better allow you to accomplish your personal retirement goals.