Social Security is an important source of retirement income, and an ideal one since your benefits won't end as long as you live, and you get periodic raises to help protect against the impact of inflation.
Most experts recommend maximizing these benefits, and there's a simple way to do that. In fact, almost anyone can raise their Social Security retirement benefits by 24%, giving them more money to live on for life.
This option is available to you if you're claiming your own benefits -- it won't work for those who are claiming either survivor or spousal benefits. But if you can exercise it, it's definitely worth considering.
How to add 24% to your Social Security checks
To make your Social Security retirement benefit checks 24% larger for the rest of your life, you'll need to wait to claim them until three years after your full retirement age (FRA). Depending on when you were born, your FRA is between 66 and 67. So if you want to raise your retirement benefits 24%, you'll need to wait to start them until you're 69, 70, or somewhere in between.
Waiting until three years after FRA to start your retirement benefits results in checks that are 24% higher because for each month after FRA that you don't receive a benefit, you get a delayed retirement credit. These are worth 2/3 of 1% per month and add up to an 8% annual raise for each year of delay. Waiting three years, therefore, means you get 24% more money than the standard amount you'd receive if you retired on time. Again, though, this only works if you're claiming your own benefits -- those claiming spousal or survivor benefits won't be able to earn delayed retirement credits.
Of course, not everyone can wait a full three years to start getting Social Security checks. You may need to rely on the money sooner in order to enable early retirement or to help you make ends meet if you can't continue working due to health or family reasons. If that's the case, though, waiting even a short time can result in more money in your checks each month. The chart below shows just how much of an impact waiting can have.
Should you wait to start Social Security to get larger benefits?
While getting a 24% raise can make a huge difference in your financial security in retirement, you have to consider the fact you'll be forgoing years of income in order to get this extra money in your checks later. You can start receiving Social Security retirement benefits as soon as 62, although that would mean not only giving up the chance at earning delayed retirement credits but also incurring early filing penalties that reduce your benefits.
In order for delaying the start of your benefits to make sense, you need to live long enough so that the higher amount you receive each month makes up for the checks you didn't get. Most seniors (around six in 10) will end up better off for having waited, but that doesn't mean everyone will. If you have a lot of health issues or people in your family tended to pass away when they were younger, you might be one of the minority of seniors who would get more lifetime benefits by starting them early.
For many retirees, however, savings start to run dry later in life, or health issues begin to arise that lead to costly medical bills. Having higher Social Security checks later in retirement makes those things easier to deal with. Raising your benefit also can increase survivors benefits (as your surviving spouse can keep the higher of your two benefits after you pass on), so if you're the higher earner you'll be ensuring your spouse has more security after you're gone by delaying as well.
Ultimately, you'll need to consider if you can afford to delay and if you want to. But the opportunity to raise your benefits by 24% is available if you haven't claimed them already, and you should think seriously about taking advantage of it if you can.