I plan to wait until full retirement age (66 and 10 mths for me) but I've decided not to wait until 70, despite the larger payout. What's missing from this discussion is the fact that most people will want to be able to enjoy that extra money when they receive it, and if i have to wait til age 70, who knows what my health will be like or if i'll have the energy to do all that travel i want to do.
I think full retirement age is a happy medium to increase your SS benefits at a time when you'll more likely be able to enjoy the $$.
lets examine this a little, but 1st the assumptions:
1) you would like to maximize your income without increasing your risk. to meet this assumption we will use a SWR of 4% in all cases examined and assume your income from SS is as risky as your income from your portfolio.
2) since i dont know your SS or porfolio amounts i will have to assume numbers here but as the math is fully scaleable, i dont need your exact numbers. i will assume at your FRA age you will get $20,000/yr in SS and your portfolio is $1,000,000.
there are 3 income cases i would like to examine, the 1st has you taking SS at your FRA. the second and third have you taking SS at your FRA+3 (almost 70 yo). in all cases i will be using real (inflation adjusted) dollars.
case 1: your income = 4% * $1,000,000 + $20,000 = $60,000 for life
case 2 & 3: your SS income will be 24% higher or $24,800. to make your after FRA + 3 yo income in these cases equal to your after FRA +3 yo income from case 1 you will need to devote $880,000 of your portfolio to the 4% rule and you do this when you are at your FRA. now you need to replace the $24,800/yr for the 1st 3 yrs which takes another $74,400; $49,600 of which you put in CDs that keep up with inflation and come due at the time you need them. that leaves you $45,600 of your porfolio.
case 2: if you spend that $45,600 evenly over the next 3 years your income stream look like:
from FRA to FRA + 3: $75,200/yr
from FRA + 3 till you die: $60,000
case 3: apply the 4% rule to that $45,600, giving you an income stream of $61,824 from FRA for your whole life.
this analysis shows that (unless you doubt the security of SS) you can get a higher income by waiting to take SS as long as you can get that 8%/yr increase.