The great thing about Social Security is that it's guaranteed to pay you a monthly benefit for life. And the higher that benefit, the more financial freedom you'll enjoy in retirement.
Many seniors are routinely disappointed when they find that their benefits can't cover all of their bills. To be fair, Social Security was never designed to replace workers' paychecks in full. But a lot of people run into trouble when they realize what limited buying power their benefits give them.
It's for this reason that it pays to do whatever you can to eke more money out of Social Security. And one simple move on your part could result in a benefit that's 24% higher -- for life.
Hold off on claiming benefits
You may be aware that you're entitled to your full monthly Social Security benefit, based on your personal earnings history, once you reach full retirement age, or FRA. FRA depends on the year you were born, and if you were born in 1960 or later, it's 67.
You're allowed to sign up for benefits before FRA, or later. The earliest you can file for Social Security is age 62, but for each month you sign up ahead of FRA, your benefit gets reduced.
The opposite happens if you delay your filing past FRA. For each month you hold off, your benefit will increase by about 2/3 of 1%. That means that for each year you wait to sign up, your benefits will grow 8%.
Once you turn 70, you can no longer accrue the delayed retirement credits that cause your benefits to grow. But if your FRA is 67 and you delay your filing until the age of 70, you'll snag a 24% boost to your Social Security income that will remain in place throughout your retirement.
Or, to put it another way, say you're entitled to $1,500 a month in benefits at a FRA of 67. Waiting until age 70 to file will give you $1,860 a month instead. That's an annual income boost of $4,320.
If you don't have another source of income outside of Social Security, an extra $4,320 a year is crucial. And even if you do have income at your disposal besides your benefits, an extra $4,320 a year could mean taking one more dream trip every year of retirement, or having that much more money to spend on hobbies and leisure.
In fact, there's no single investment out there that guarantees you an 8% yearly return without you taking on the risk of losing money. But delaying Social Security does guarantee you that 8% boost, and so it's worth going after.
Of course, if you're entering retirement with a giant pile of savings in your IRA or 401(k) plan, then you may not care about getting more money out of Social Security. But if you think a 24% boost will be helpful during your senior years, then you should plan on delaying your filing until the age of 70.