Social Security's trust funds will be exhausted by 2031, according to the Congressional Budget Office, necessitating substantial benefit cuts if the government doesn't reform the program before then. That makes it all the more important for you to make smart choices to maximize your benefits, even if you're not claiming Social Security yet. Here's one trick that can help today's workers increase their benefits by up to 77%.
Delaying benefits brings larger checks
You can claim Social Security as soon as you turn 62 or at any point afterward, but this decision has important ramifications. The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. It's 66 if you were born between 1943 and 1954. Then, it rises by two months for every year thereafter until it hits 67 for those born in 1960 or later.
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You must wait to claim until your FRA if you want the standard amount you're entitled to based on your average monthly earnings over your 35 highest-earning years, adjusted for inflation. If you claim benefits before your FRA, you get smaller checks. Starting at 62 will only get you 75% of your scheduled benefit if your FRA is 66. If your FRA is 67, you only receive 70% of your scheduled benefit if you begin Social Security at 62.
Every month you delay benefits increases your checks slightly until you reach your maximum benefit at 70. This is 124% of your scheduled benefit if your FRA is 66 or 132% if your FRA is 67.
To illustrate what kind of a difference this can make, consider someone entitled to a $1,500 benefit at their FRA of 67. If they claimed right away at 62, they'd only get $1,050 per month, but if they waited until 70, they'd get $1,860 per month. That's a difference of $810, or about 77%, more every month, just for waiting eight more years to claim benefits.
Your mileage may vary
The above example looks exclusively at monthly benefits, but you also have to consider your possible lifetime benefit when deciding when to start Social Security. That's where things can get a little hairy. Starting early actually makes more sense than delaying benefits if you believe you're not going to live very long. You'll get smaller checks, but you'll receive benefits for a longer period of time, leading to more money overall.
Delaying benefits really only pans out if you expect to live a longer life -- into your mid-80s or beyond. That's because it takes time to begin outearning someone who started benefits at a younger age. In our example above, if you received a $1,050 per month check beginning at 62, you'd have already received $100,800 in benefits by the time you turn 70 and $226,800 by the time you're 80. If you'd chosen to wait until you were eligible for your $1,860 monthly benefit at 70, you'd have earned nothing from Social Security in your 60s, and by the time you're 80, you'd only have $223,200.
But beyond this point, the tables turn quickly and the larger monthly checks give the edge to those who delayed benefits. By 90, you'd only have received $352,800 in total benefits if you started at 62, while you could have had $446,400 if you delayed benefits until 70.
Not everyone can afford to live without Social Security that long, but even delaying by a few months can make a lasting difference. If your FRA is 67 and you originally planned to begin benefits at 62, you could increase your checks from 70% of your FRA benefit to 75% just by waiting one year to start claiming.
If the government does end up slashing benefits once Social Security's trust funds are depleted, that could affect how much more you receive per month for delaying benefits. But it's not going to change the fact that you will get more money if you wait to start benefits until you're older. Just don't delay past 70, because your checks won't grow any larger after this point.
Give some thought to when you'd like to start Social Security if you haven't already. Your decision doesn't have to be set in stone. As you near retirement, you can change your mind and delay benefits longer if you have enough personal savings to cover all of your expenses in the early years of your retirement, or start benefits earlier if you need Social Security to get by.
