For many people, age 70 seems like a late start to retirement. To others, it is just a necessity. However, 70 is a criticially important number for almost everyone who is trying to decide when to start Social Security. For a retiree who waits that extra 3-4 years, they receive an increase of 8% each year that he or she waits. There is no other financial tool (annuities included) that increases your payout so dramatically for such a short delay.
Of course, that doesn’t mean retirement has to wait that long. Retirees may draw from IRA’s and 401k’s to bridge the gap to 70. When running retirement outcome simulations (also known as Monte Carlo Simulations), the wait to 70 significantly improves the probability of a successful outcome.
The exception is for the retiree who is collecting spousal benefits. Spousal benefits are Social Security benefits that are derived from your spouses work history and not your own. Those benefits do not increase with a wait to 70. They do, however, get reduced if you take them before your full Social Security age (66 to 67 depending on your birthdate).
Finally, the old strategy of taking your spousal benefit at full age (i.e. - 66) and then switching to your own Social Security benefit at age 70 is no longer allowed unless you were born before 1954. So in the next few years, the last generation of Social Security earners will be able to utilize this strategy.