If you wait until after reaching full retirement age to claim your Social Security retirement benefit, you could get higher monthly income for the rest of your life. You can allow your Social Security benefit to increase until your 70th birthday if you choose to do so. Here's a primer on how Social Security delayed retirement works, and what it could mean for you.

What does it mean to "delay retirement" for Social Security purposes?

You're considered to have delayed retirement for Social Security purposes if you apply for your retirement benefit to start after reaching your full retirement age. Your full, or normal, Social Security retirement age can be as early as age 66 or as late as age 67, depending on the year in which you were born:

If You Were Born In...

Your Full Retirement Age Is...

1954 or earlier

66 years

1955

66 years, 2 months

1956

66 years, 4 months

1957

66 years, 6 months

1958

66 years, 8 months

1959

66 years, 10 months

1960 or later

67 years

Data source: Social Security Administration.

Americans who qualify can claim Social Security at any time between ages 62 and 70. So, for Social Security purposes, "delayed retirement" means starting benefits between the month after you reach full retirement age and the month you'll reach age 70.

Higher benefits for life

As long as you're insured (eligible for benefits) when you reach your full retirement age, you can receive delayed retirement credit if you choose to wait to claim your Social Security benefits.

The rule for delayed retirement is quite simple: Your initial monthly benefit will be increased at a rate of 8% per year (two-thirds of 1% per month) from the month you reach full retirement age until the month you choose to start your retirement benefits.

It's also important to mention that this is in addition to any cost-of-living adjustments (COLA) the Social Security program gives beneficiaries during the period you delay retirement.

How your Social Security benefit is calculated

Your initial Social Security benefit is determined by adjusting (indexing) your lifetime Social Security taxable earnings for inflation and considering your 35 highest-earning years. These 35 years of earnings are then averaged together and divided by 12 to determine your lifetime indexed monthly earnings.

This average is then applied to a formula to determine your primary insurance amount (PIA), which is your initial benefit if you claim Social Security in the month you'll reach your full retirement age. As of 2017, this formula is:

  • 90% of the first $885.
  • 32% of the amount above $885, up to $5,336.
  • 15% of the amount over $5,336.

The amount calculated from this formula can then be adjusted up or down, depending on when you decide to start your retirement benefit.

What it could mean to you

Let's say you were born in November 1951, which gives you a full retirement age of 66. According to your most recent Social Security statement, if you were to start your retirement benefits in November, you can expect an initial monthly benefit of $1,800.

An older couple looking at paperwork, smiling as they sit side by side at a table.

Image source: Getty Images.

If you were to delay retirement by one year, meaning that you start your benefit in November 2018, you would receive an 8% increase in your PIA. That means that your initial monthly benefit would rise to $1,944, plus any cost-of-living adjustment (COLA) that is given for 2018.

For another example, if you were to delay retirement until age 70, you would get four years' worth of delayed retirement credit, which translates to a 32% increase in your initial monthly benefit. This would give you a benefit of $2,376 -- $576 more than you would have gotten at full retirement age – plus any COLAs that are given during those four years.

Is delaying Social Security the right move for you?

As you can see, waiting beyond your full retirement age to start collecting Social Security benefits can result in a significantly higher monthly check for the rest of your life, which can make a big difference in your quality of life.

However, it's important to point out that the higher monthly income is only one piece of the puzzle. In fact, the vast majority of retirees claim Social Security at or before their full retirement age. There are some good reasons to wait until 70, some reasons to claim Social Security on time, and some good reasons to claim Social Security early. The bottom line is that there is no one-size-fits-all ideal Social Security claiming age, so it's important to weight all of the pros and cons before making your decision.

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