Having a generous income in retirement is crucial to enjoying your later years. For most retirees, this income comes from savings and from Social Security.
The good news is, there's a really simple way to raise the income Social Security provides by 8% -- and you can do it in just one year's time. Here's what you need to do.
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This simple decision makes a huge difference in your Social Security checks
Maximizing your retirement income is a smart financial move, as you may face significant expenses as a senior, both for recreation and for essentials such as healthcare. Fortunately, you can increase the amount you have to live on by a whopping 8% in a single year.
How do you do that? You'll simply need to wait to claim Social Security until after your full retirement age (FRA). Your FRA is between 66 and 2 months and 67 years old, with your specific FRA determined based on when you were born. If you start getting benefit checks at FRA, you'll get your standard benefit. That's based on average wages over your 35 highest-earning years, which you receive a percentage of.
But you can actually end up with monthly Social Security checks that are higher than your standard benefit. That's because those who wait to file for checks are able to earn delayed retirement credits. For each month you delay, you'll earn one credit that raises your checks by 2/3 of 1%. If you do the math, this adds up to an 8% increase in benefits for every single year you wait.
Delayed retirement credits can be earned until the age of 70. For those with an FRA of 67, that means you can earn three years' worth of these credits, and each year will raise your check amount by 8%. You'll end up with a whopping 24% higher monthly payment from Social Security if you max out your credits by waiting until 70 to start checks. For those whose FRA is earlier, you can earn even more of these credits, boosting your income further.
Now, you do have to give up at least a year of checks if you take this approach. But if you forgo Social Security income for even one single year, from 67 to 68, the 8% raise you get can make a big difference in how far your benefits end up going later. Many people rely on Social Security for a large percentage of their income, especially as they get older and they don't have as much savings, so an 8% benefit increase could make it much easier to make ends meet.
Of course, you can't live on Social Security alone even if you do delay your benefits for the maximum time (and the program was never designed to be the sole source of income in retirement). But since these benefits are guaranteed to last for life and protected against inflation, they will be an important income source. If you can find a way to wait at least an extra year, you could end up very happy to have the extra cash coming in when you need it most late in life.
