Social Security's full retirement age is climbing, and that means that the bonus you'll get if you wait to claim your benefits until age 70 will be smaller than your parents'.

Social Security rewards those who wait

Social Security has a problem on its hands. Social Security pays its recipients from the payroll taxes it collects on current workers, but retiring baby boomers are causing the programs tax revenue to shrink and its expense to grow. Social Security has paid out more in benefits than it's collected in tax revenue since 2010, and since then, it's been making up the difference from its savings.

A shocked millennial clasps his hands to his face in dismay.

IMAGE SOURCE: GETTY IMAGES.

Congress has long known that it would feel the pinch when our parents began retiring, so for decades, it's been offering incentives to people to delay when they claim their benefits.

These delayed retirement credits increase a recipient's Social Security income by a fixed percentage for every month they wait to claim, up until age 70. If you're born after 1943, the credit is two-thirds of 1% for every month you wait, or 8% per year.

It's not as good of a deal as it used to be

Delayed retirement credits only kick in when you reach full retirement age, or the age at which you're entitled to 100% of your Social Security benefit. That age used to be 65, but it's been increasing since 1938, and currently its 66 and two months.

While the age at which you get your full benefit is climbing, delayed retirement credits still stop at age 70. Therefore, the number of months used to calculate the delayed retirement credit is getting smaller, and thus, the maximum benefit you get from waiting is shrinking.

For example, if your dad was born between 1943 and 1954, his full retirement age is 66. If he waits until age 70 to claim, his benefit would be 132% of his full retirement age benefit. However, if you were born in or after 1960, your full retirement age is 67, so you'll only receive 124% of your full retirement benefit if you wait until age 70.

That difference can really add up over time. Let's assume you both have a monthly full retirement age benefit of $1,000. His payment would be $1,320 per month if he waits until 70 to claim, while your benefit would be only $1,240. If you both live to age 90, he would end up getting a lot more in lifetime benefits than you.

A chart showing how much more someone will receive in lifetime benefits if their full retirement age is 66, and they claim at age 70.

AUTHOR'S CALCULATIONS.

Is it still worth waiting?

Breakeven analysis suggests that if you live into your 80s or later, your total lifetime Social Security income will be bigger if you wait to claim than if claim early. Yet, few people wait. According to the Center for Retirement Research, less than 10% of people claim Social Security after age 67 and less than 5% claim at age 70.

However, that could change. The average retirement age is climbing as healthier, longer-living Americans work later into their life. Recipients still get more money by waiting to claim benefits, and working additional years can increase your full retirement age benefit because high income-earning years replace low income-earning years in Social Security's benefit calculation.

Overall, there are good reasons why it makes sense to delay claiming Social Security, just know that if you do wait, it may not pay off as handsomely for you as it did your parents.

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