Social Security was never meant to pay for your whole retirement, but there's no denying that large checks can make your life a lot easier. You might know that you can grow yours by increasing your income today, but there's another, easier way to squeeze more out of the program, and it could net you an extra $1,600 a year or maybe even more.
Why age matters when claiming Social Security
The federal government assigns everyone a full retirement age (FRA) based on their birth year. This is between 66 and 67 for today's workers. If you apply at this age, you get the full benefit you've earned based on your work history. But you can also sign up earlier or later.
Image source: Getty Images.
The catch is that every month you claim benefits before your FRA shrinks your checks. You only get 70% of your full benefit per check if you sign up at 62 and your FRA is 67, or 75% if your FRA is 66. To put this in perspective, if you qualify for the $1,669 monthly benefit at your FRA of 67, you only get $1,168 per month when claiming at 62.
Every month you delay benefits boosts your checks a little, but how much your checks grow depends on your age and your FRA. Here's a table showing how quickly benefits grow over time:
|
Monthly Growth Rate |
If You Have an FRA of 66 |
If You Have an FRA of 67 |
|---|---|---|
|
5/12 of 1% |
From 62 to 63 |
From 62 to 64 |
|
5/9 of 1% |
From 63 to 66 |
From 64 to 67 |
|
2/3 of 1% |
From 66 to 70 |
From 67 to 70 |
Data source: Social Security Administration.
Even a single month will grow your checks a little, but the longer you wait, the more substantial the increases become.
You'll get the largest increases if you delay benefits past your FRA. Waiting a single year beyond your FRA boosts your benefit by 8%. Returning to our $1,669 monthly benefit example from above, an 8% increase would add another $134 per month to your checks, or about $1,600 per year.
And if you delay Social Security all the way until 70, you could boost your checks by 24% to 32%, depending on your FRA. There's no reason to delay beyond this. You reach your maximum benefit at 70, and the government won't reward you for waiting any longer.
Should you wait to claim?
Waiting to claim Social Security can have major benefits for some, but it's not the right decision for everyone. If you have a short life expectancy, for example, you should sign up as soon as possible. You'll probably get a larger lifetime benefit by claiming for as many years as you can than you would by delaying benefits.
You also have to consider your financial situation. If you're unable to work and you can't afford all your bills, signing up for Social Security early could help you avoid debt. But if neither of these things is an issue for you, delaying benefits could make sense.
If you're not sure how much you'll get from the program, create a my Social Security account. There's a calculator here that can estimate what your benefit will be at any age based on your work history to date. You can also see how changes in your annual income might affect your benefit.
Once you know your monthly benefit, it's pretty easy to estimate your lifetime benefit for any given age. Take your monthly benefit and multiply it by 12 to get your estimated annual benefit. Then, take this number and multiply it by the number of years you expect to claim benefits. For example, if you expect a $2,000 benefit for 20 years, you'd have a lifetime benefit of $480,000.
Try to hold out until the age you believe will give you the largest lifetime Social Security benefit. And take note of how much you expect from the program, so you know how much you need to save for retirement on your own. Review your claiming strategy along with the rest of your retirement plan annually to make sure it still works for you.
