How Much Does Waiting to Claim Raise My Social Security Benefits?

When you're planning for how to support yourself in retirement, chances are good that Social Security benefits will be a big source of funds. While Social Security benefits are designed to replace around 40% of your preretirement income, the specific amount you receive will vary, depending on many factors including what you earned during your career.

One of the most important factors in determining your Social Security benefit amount -- and the one you have the most control over -- is the age at which you claim benefits. You can claim benefits anytime starting at the age of 62, but waiting to claim benefits increases your income. In fact, depending on how long you wait, you might be able to get more than a 75% increase in your monthly benefit compared with claiming at 62.

Waiting can increase your retirement income substantially, because claiming benefits early results in a permanent benefits reduction, while claiming benefits late results in a permanent benefits increase. This guide will explain why waiting can raise your benefits and will also help you determine if waiting is the best course of action in your situation.

What does it mean to wait to claim Social Security benefits?

Workers generally become eligible to claim Social Security retirement benefits at the age of 62. However, claiming benefits at 62 is considered claiming early, because 62 is before full retirement age (FRA). Full retirement age is determined by law and is between 65 and 67, depending on your birth year. Claiming before FRA results in a benefits reduction.

If you claim at your full retirement age, you're said to claim on time. If you claim after full retirement age, you're delaying your claim, so you earn delayed retirement credits. For each month you delay, your Social Security income rises until you hit age 70, when there's no further benefits increase.

So technically, if you claim benefits anytime after age 62, you're waiting to claim your benefits, because you're claiming later than you could. Waiting increases your benefits if you claim after age 62, but for different reasons depending on whether you've hit your FRA:

• Waiting to claim benefits from age 62 to FRA increases your Social Security income because you don't face a penalty for claiming early that would otherwise reduce your benefit.
• Waiting to claim benefits between FRA and age 70 increases your Social Security because you get delayed retirement credits that boost your benefit.

What is full retirement age?

The table below shows your full retirement age, depending on when you were born. Knowing your FRA will help you determine how much your benefits will be increased or decreased based on the age at which you first claim Social Security retirement income.

Table source: Social Security Administration.

What is the standard Social Security benefit?

Reductions for claiming early and increases for claiming late are all based on the standard benefit you'd receive at full retirement age, so you need to know how to calculate the standard Social Security benefit. This standard benefit is called your primary insurance amount (PIA). Your PIA is calculated by:

• Determining your Average Indexed Monthly Earnings (AIME): AIME is calculated by adjusting your wages for inflation for each year you worked, adding up your inflation-adjusted average wages in the 35 years you earned the most, then dividing by 420 (the number of months in 35 working years).
• Applying a formula to AIME. The formula gives you benefits equal to 90% of AIME up to a specific income threshold, referred to as a bend point. You also get additional benefits equal to 32% of AIME on the amount of income between the first and second bend points and 15% of AIME above the second bend point. The percentages of AIME you get are always the same, but the bend points change from year to year. The bend points used to determine your PIA are the ones in effect the year you turn 62.
• Figuring in cost-of-living adjustments: For each year you wait after 62, the PIA determined at 62 is adjusted upward if there is a Social Security cost-of-living adjustment (COLA). COLAs increase Social Security benefits in most years, with the amount of the increase based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

This calculation gives you the primary insurance amount you'd receive if you claim benefits at exactly full retirement age. This primary insurance amount is adjusted downward if you are claiming benefits before FRA and upward if you are claiming benefits after FRA.

How much does waiting until full retirement age raise Social Security benefits?

Because you can claim Social Security starting at 62, you need to figure out how much benefits go up if you wait until after 62 to start receiving them. This means you need to know what the early claiming penalty is if you get your benefits before FRA. The amount of your benefits reduction depends on just how early you claim benefits:

• Benefits are reduced by 5/9 of 1% per month for each of the first 36 months prior to FRA.
• Benefits are reduced by an additional 5/12 of 1% per month if you claim more than 36 months before FRA.

To calculate your benefits reduction:

• Multiply ((5/9) x .01) times the number of months before FRA that you claim benefits, up to 36 months.
• Multiply ((5/12) x .01) times additional months before FRA that you claim benefits before 36 months.
• Add these two numbers together.

If you claim exactly 36 months early, you'd reduce your benefits by ((5/9) x .01) x 36 = .20 or 20%. If you claim 48 months early, you'd reduce benefits by (((5/9) x .01) x 36) + (((5/12) x .01) x 12) = .25 or 25%.

The benefits reduction is about 6.7% for each of the first three years and 5% for each additional year thereafter. Looked at another way, for each year you wait after 62, you avoid the additional reduction in benefits that would have occurred had you claimed benefits as soon as you were able.

Let's say your primary insurance amount -- or the amount you'd have received at a full retirement age of 66 -- was $1,500. Retiring at 62 would result in a 25% benefits reduction as we calculated above. So your benefit would be just $1,125 ($1,500 - the 25% reduction in benefits). If you didn't retire at 62 but instead waited until 66, your benefit would be $375 higher. That's a 33.3% increase compared to $1,125 -- so in this case, waiting four years would raise your Social Security benefits by about 33.3%.

Wondering why the percentage increase (about 33.3%) is different from the percentage decrease (25%)? It's because you're comparing the change to the original value, and $375 is a larger percentage of $1,125 than it is of $1,500.

How much more income will you have if you wait until full retirement age?

The table below shows how much a $1,500 Social Security benefit could increase each month if you wait until your full retirement age to claim benefits.

Table calculations: Author.

As you can see, waiting from 62 to 67 could result in more than a 40% increase in your monthly benefit. This is a huge change in the income you have available to you in retirement.

How much does waiting until after full retirement age increase Social Security benefits?

Once you hit full retirement age, you can claim benefits and receive your primary insurance amount. Or you can wait longer to claim benefits and earn delayed retirement credits. Delayed retirement credits can be earned until age 70.

If you delay claiming benefits and were born after 1943, your primary insurance amount is increased by 2/3 of 1% per month for each month you wait after FRA until the age of 70. This is an:

• 8% increase in benefits if you delay one year
• 16% increase in benefits if you delay two years
• 24% increase in benefits if you delay three years
• 32% increase in benefits if you delay four years

Since you are only able to earn delayed retirement credits until 70, there's a cap on how much you can increase your benefits. If your full retirement age is 66, for example, you could claim benefits a maximum of four years after FRA, so that's why the maximum increase in benefits listed here is for a four-year delay.

Those with an FRA under 66 were born prior to 1943, so the primary insurance amount is increased by a different amount than 2/3 of 1% per month. The table below shows how much benefits are increased by delaying after FRA if you were born prior to 1943.

Table source: Social Security Administration.

How can you calculate how much waiting until after full retirement age will raise your Social Security benefits?

If you were born in 1943 or later, here's how you'd calculate the amount your benefits will increase if you wait until after FRA to claim benefits:

• ((2/3) x .01) x the number of months after FRA that you claim

So if you claim 14 months after FRA, you would see a benefits increase of:

• ((2/3) x .01) x 14 = .0933

This is about a 9.3% benefits increase.

If you were born before 1943, you'd use the percentage from the table above to calculate your benefits increase. You'd simply multiply the appropriate percentage by the number of months you wait to claim benefits. So if you were born in 1941, you'd multiply:

• ((5/8) x .01) x the number of months after FRA that you claim

How much more income will you have if you wait until after full retirement age?

The table below shows how a $1,500 benefit would be affected by waiting until after FRA to claim it if your primary insurance amount at FRA would have been $1,500.

Table calculations: Author.

How much does waiting raise your Social Security benefits?

As you can see, the specific amount of your benefits increase will depend on how long you wait after the age of 62 to claim your benefits. You can calculate how much waiting will raise your benefits by:

• Applying the appropriate increase or decrease to your primary insurance amount based on whether you claim early or late.
• Comparing your benefit at any age after 62 to the reduced benefit you'd have received had you claimed Social Security as soon as you were able.

The chart below also shows how much benefits would increase for each year you wait after age 62 until you hit age 70 if your primary benefit amount is $1,500.

Table calculations: Author.

Does it always make sense to wait to claim benefits?

Obviously, your monthly income would be a lot higher if you wait as long as possible to claim benefits. However, you also forego years of money from the Social Security Administration by waiting.

If you wait from 62 to 67, you miss out on 60 months of income (5 years times 12 months per year). If you would have received $1,050 per month for each of those 60 months, that's $63,000 in income you've given up by waiting to claim benefits. While you'll get a higher income later because you waited, you need to receive that higher monthly benefit for a long time to make up for the $63,000 in income you missed out on.

To determine if it makes sense to wait, calculate how long you need to receive the higher income to make up for the income missed. If you don't receive the higher benefit for long enough -- say because you pass away a year or two after claiming Social Security -- you're worse off for having waited. If you do receive the higher income for long enough to make up for the missed $63,000, you break even. And if you receive the higher income for more time after making up for the missed income, you're better off.

Do this calculation anytime you think it makes sense to wait to claim Social Security. The formula to figure out when you'll break even requires you to:

• Figure out the monthly income you'd receive starting at 62.
• Calculate the number of months between the time you claim benefits and 62. If you claim at 63, it's 12 months. If you claim at 64, it's 24 months.
• Multiply the monthly income you'd have received starting at 62 by the number of months you're waiting to claim benefits.
• Calculate how much more monthly income you'll have when you claim later. Do this by subtracting the income you'd receive at 62 from the income you'll receive at your chosen claiming age.
• Divide the missed income by the increase in income that results from delaying.

We've already done the first three steps in our example above and figured out we're missing out on $63,000 by waiting to claim until age 67 instead of 62. So next we'll calculate how much higher the benefit is at 67.

• If 67 is your full retirement age, your monthly income would be your primary insurance amount of $1,500.
• Subtract: $1,500 (your PIA) - $1,050 (the income you get at 62) to find you get $450 more per month.
• Divide $63,000 in missed income by $450 per month to account for the higher benefit to find you'd need to receive the higher benefit for 140 months to make up for missing out on $63,000 over five years.

Unless you live about 11.67 years after turning 67 and starting your benefits, you'd end up worse off by waiting to claim at 67 instead of claiming at 62. It can be hard to predict if you'll live long enough to break even or do better, but consider your current health status and family health history to help you make this decision.

Now you understand how much waiting raises your Social Security benefits

As you can see, waiting to claim Social Security benefits as long as possible results in a higher monthly income from Social Security -- but it doesn't necessarily result in receiving more money in total from the program.

Think about your likely lifespan, whether you can afford to wait to claim benefits, and whether you'd prefer less money at a younger age or more money later. Whatever you decide, make sure you don't claim benefits until you understand how waiting raises your Social Security benefit so you can make an informed choice.