Social Security gives seniors guaranteed cash in retirement (about $1,555 per month, on average). It's a nice chunk of change, but it could be disappointing to those who were hoping to cover the bulk of their expenses with their monthly benefits.
Ultimately, how much you get is up to the Social Security Administration, but there are things you can do to make the government look at you in a more favorable light. There's one trick in particular that can boost your benefit by 24%, but it's not for everyone.
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Timing is everything
You probably know that you become eligible for Social Security at 62, and a lot of people choose to sign up then. But it could be a costly mistake. In the eyes of the Social Security Administration, you haven't yet reached your full retirement age (FRA), even if you've stopped working.
Your FRA, according to the Social Security Administration, is between 66 and 67, depending on your birth year. Here's a chart to help you find yours.
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943 to 1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 and later |
67 |
Data source: Social Security Administration.
You're allowed to start benefits before this, but every month you claim early reduces your checks slightly. Those with an FRA of 67 only get 70% of their full benefit per check if they sign up as soon as they turn 62, while those with an FRA of 66 get 75% if they start at 62.
The good news is, this also works in reverse. If you delay benefits past your FRA, your checks grow a little every month until you reach your maximum benefit at 70. For those of us with an FRA of 67, that's 124% of our full benefit per check, or 24% more than we would've gotten if we had signed up at our FRA. Those with an FRA of 66 get 132% of their full benefit per check if they sign up at 70.
To put this in perspective, if you qualified for the average monthly benefit of $1,555 per month at your FRA of 67 and you delayed benefits until 70, you'd get $1,928 per month. That's nearly $4,500 more per year.
Is it the right move for you?
Delaying benefits could net you tens or even hundreds of thousands dollars extra over your lifetime, but only if you live long enough to make it worth it. When you delay Social Security, you're missing out on years of possible benefits, and it takes time to make that up.
For example, if you claimed a $1,555 benefit beginning at 67, you'd already have received $55,980 from Social Security by the time you turned 70. If you are unlucky enough to die in your early 70s, starting earlier would clearly be the smarter choice.
If you waited until 70, you might get very little or nothing at all from the program. Of course, no one knows when they're going to die. But if you have reason to believe you won't live very long, it's to your advantage to sign up for benefits earlier, possibly even at 62.
You also have to consider your financial state when deciding whether delaying benefits is right for you. If you were forced to retire unexpectedly and you don't have a large enough nest egg, beginning Social Security could be wise. You might be settling for a smaller lifetime benefit, but if it keeps you out of debt, it's worth it.
No matter what your situation, it's a good idea to consider a few different starting ages before deciding which one makes the most sense for you right now. Every month you delay increases your benefits slightly, so even if you can't wait until 70, that doesn't mean you can't boost your benefit.
Create a my Social Security account, if you haven't already, to get estimates of your monthly benefit at various ages and figure out which one makes the most sense. You can always change your mind later if your circumstances change, but by having a plan in place, you can begin to work out how much you must save for retirement on your own.
