Social Security may have its share of rules, but the program is actually quite flexible. In fact, you can sign up for benefits at any point starting at age 62 (though from a financial standpoint, it doesn't pay to sign up after the age of 70).
Now you're entitled to your full monthly benefit based on your personal wage history once you reach full retirement age, or FRA. FRA is either 66, 67, or somewhere in between, depending on what year you were born in.
But you can delay your filing beyond that point, and for each month you do, your benefit increases 2/3 of 1%. All told, that amounts to an 8% boost per year you hold off. And that incentive doesn't run out until age 70, which means that if your FRA is 67, you have an opportunity to lock in a monthly benefit that's 24% higher -- for life.
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Of course, delaying Social Security is not an easy thing to do. It means having to wait longer to get your money which could, in turn, mean having to plug away at a job for a few extra months or years, depending on how long you hold off on filing. But it pays to consider delaying your claim if these scenarios apply to you.
1. You don't have enough savings
As a general rule, you should aim to sock away enough money in an IRA or 401(k) plan to replace 10 to 12 times your ending salary. This means that if you're earning $100,000 a year toward the end of your career, ideally, you'll enter retirement with a nest egg worth $1 million to $1.2 million.
If you're nowhere close to that target, then delaying Social Security makes sense. A higher monthly benefit could compensate for smaller IRA or 401(k) withdrawals.
2. You're worried about paying for healthcare
HealthView Services estimates that the average healthy 65-year-old couple retiring in 2021 will spend as much as $662,156 on healthcare throughout retirement. That also means the typical couple will spend 68% of their Social Security benefits on healthcare.
But if you snag a higher monthly benefit, you'll have an easier time paying for healthcare. And you might also stress about it a lot less.
3. You have big retirement goals you want to achieve
Maybe you didn't get to travel all that much during your working years, and now you want to finally trek through Asia and visit a host of European cities. Or maybe you spent your career living in a modest suburban town, and now you want to know what it's like to live in a city like San Francisco or New York.
If you have lofty retirement goals, a higher Social Security benefit could help turn them into your personal reality. And even if your goals are more modest, a more generous benefit will still help ensure that you can achieve them without worry.
Delaying Social Security generally involves making some degree of sacrifice. But if these situations apply to you, then it's worth doing your best to raise your monthly benefit for life.
