The average Social Security retirement beneficiary receives about $1,413 per month in benefits, or just under $17,000 per year. But what if I told you these retirees could instead be collecting $1,837 per month in benefits, or over $22,000 per year?
It's possible to boost your Social Security earnings by over 30%, and it's easier than you may think. The secret is delayed retirement: By waiting a few extra years to start claiming your Social Security benefits, you'll be rewarded with fatter checks once you do start receiving those benefits.
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How delayed retirement works
Think of delayed retirement as the famous Stanford marshmallow experiment, where researchers gave children the option to eat one marshmallow immediately or wait a few minutes and receive two marshmallows. Delaying your Social Security benefits isn't quite that simple -- nor is it guaranteed to pay off in the long run -- but it's similar.
You're allowed to start claiming Social Security benefits as early as age 62, but the longer you wait, the bigger your monthly checks will be. And if you wait beyond your full retirement age, you'll receive a bonus on top of your full benefits.
Your full retirement age is the age at which you'll receive 100% of your benefits, and it depends on the year you were born:
| Birth Year | Full Retirement Age |
|---|---|
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943-1954 | 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 or later | 67 |
If your full retirement age is older than 65 (meaning you were born in 1938 or later), you can start claiming Social Security at 62 -- but you won't receive 100% of your benefits.
Say, for example, you were born in 1960 and your full retirement age is 67. If you were to retire at 62, you'd only receive 70% of your earned benefits. Wait a year and start claiming at 63, and you'd get 75%. At 64, you'd receive 80%, and so on until you reach 67 and earn 100% of your benefits.
However, delaying retirement by just a few more years has even more perks. If you wait another year and start claiming Social Security at 68, you'll receive 108% of your benefits. At 69 you'll get 116%, and at 70 -- the age at which your benefits max out -- you'll receive 124%.
Older workers born before 1960 can see an even bigger bonus. For example, if your full retirement age is 66 (meaning you were born between 1943 and 1954), by waiting until age 70 to retire, you'll receive 132% of your full benefit amount.
What if you wait beyond age 70 to start claiming benefits? Nobody will stop you, but your benefits won't continue to increase. However, if you choose to work longer, you will have the advantage of continuing to contribute to your retirement fund. So even though your Social Security benefits will remain the same, your overall retirement savings will continue to grow the longer you work.
Delayed retirement in action
Let's say, for instance, you were born in 1960 -- so you have a full retirement age of 67 -- and are currently earning $50,000 per year. Your full benefit amount is an estimated $1,616 per month, but if you were to retire early at 62, your estimated monthly benefit would be around $1,077. And if you wait until 70, you'll receive roughly $2,060. (Calculate your estimated Social Security benefit here.)
An extra $1,000 each month is already substantial, but it has an even greater impact over time. Say you retire at 62, receiving $1,077 per month. After one year, you'll have earned around $12,924. If you live to age 87, then you'll get a total of $323,100 (in today's dollars, not adjusted for inflation) from Social Security. Not too shabby.
However, if you retire at 70 and get $2,060 per month, that's $24,720 per year. Over the next 17 years of retirement, you'll get a total of $420,240. In other words, you could earn nearly $100,000 more in Social Security benefits alone by working an extra eight years.
Is delayed retirement right for everybody?
Not everyone will be able to work until age 70, or even until their full retirement age. In fact, 42% of men and 48% of women start claiming benefits at 62, and the majority of beneficiaries claim benefits before reaching their full retirement age, according to a study by the Center for Retirement Research at Boston College.
Injuries and job loss often force workers into early retirement, so not everyone can choose when they retire. Other employees may decide early retirement is worth the cut in benefits, especially if they have ample retirement savings or a spouse who will continue working a few more years.
Ultimately, choosing when to retire and claim benefits is a personal decision. You may decide that your nest egg is strong enough already, and you'd like to start enjoying your retirement benefits while you're young-ish. Or you may choose to leave your benefits untouched until age 70 so that they'll serve as a kind of insurance against financial hardship late in life. Either way, knowing your options and crunching a few numbers beforehand can help you make that decision.
