When it comes to signing up for Social Security, you get your share of choices. You can opt to file for benefits as early as age 62, which is a route many seniors take. But you're not entitled to your full monthly benefit based on your personal wage history until you reach full retirement age, or FRA.
FRA falls out at 66, 67, or somewhere in between, depending on your year of birth. But you don't have to file for Social Security once FRA arrives. Rather, you can delay your filing beyond FRA and boost your monthly benefit in the process.
For each month you hold off on claiming Social Security past FRA, your monthly benefit will rise by 2/3 of 1%. That amounts to an 8% increase every year.
Image source: Getty Images.
Once you turn 70, your Social Security benefit won't grow anymore, so 70 is generally considered the latest age to file, even though you're technically not forced to do so at that time. But if you're able to delay your filing until age 70, you'll benefit for two big reasons.
1. A higher guaranteed income stream
Ideally, you'll enter retirement with some money socked away in a savings plan like an IRA or 401(k). But who's to say how long that money will last? The extent to which you deplete your nest egg will hinge on factors like your withdrawal rate and the way the market performs. And the latter is certainly out of your control.
The great thing about boosting your Social Security benefit by waiting until age 70 to file is that you're guaranteed that higher income stream for life. Once you lock in a more generous benefit, you get that sum every month, regardless of how the stock market performs.
2. A chance to grow your nest egg
If you're going to delay your Social Security filing, you may need to keep working until you're ready to sign up for benefits. But that could actually be a very good thing for your nest egg -- namely, because it might inspire you to boost it.
Imagine you have a $900,000 nest egg at age 67, which is also your FRA, and you decide to delay your Social Security filing until age 70. Doing so will cause your monthly benefit to increase by 24%.
But that's not all. Say you're able to add $1,000 a month to your retirement plan between the ages of 67 and 70, all the while keeping your nest egg invested at an average annual 5% return, which is fairly conservative but reasonably appropriate for a near-retiree. Come age 70, you'll be sitting on around $1.08 million. That's a nice boost that could make retirement more manageable financially.
It pays to wait
Some people can't afford to delay their Social Security claims until age 70 (say, because health issues force them to stop working sooner). But if you have the option to sit tight and wait to file, doing so could result in not just a higher monthly benefit for life, but also a more robust nest egg to rely on.
