The [Social Security] system is not intended as a substitute for private savings, pension plans, and insurance protection ... the individual's own work, his planning, and his thrift will bring him a higher standard of living upon his retirement ... Hence, the system both encourages thrift and self-reliance and helps to prevent destitution in our national life. -- Dwight David Eisenhower
President Eisenhower does a good job of explaining that, contrary to some people's assumptions, Social Security isn't a handout. It's a program working people pay into throughout their careers, and in exchange, they get some necessary support when they need it later in life.
Image source: Getty Images.
Providing, on average, about 40% of our pre-retirement income, Social Security is also not likely to fully support any of us. It's worth trying to maximize your benefits, and there are some ways to do so, so here's how you might get 24% (or more!) extra out of the program.
Social Security basics
There are a bunch of ways to increase your Social Security benefits, and we'll focus here on one of the most powerful. To set the stage, know that each of us has a full retirement age at which we can start collecting the full benefits we're entitled to based on our earnings history. For most of us, that full retirement age is 66, 67, or somewhere in between.
We can actually start collecting our benefits as early as age 62 and as late as age 70, though -- and when we start has a big impact on the size of our checks.
How to collect an extra 24% -- or more
For each year beyond your full retirement age that you delay starting to collect your benefits, up to age 70, your checks will grow about 8% bigger. So delaying from age 67 to 70 will make your benefits about 24% bigger -- enough to turn a $2,000 check into a $2,480 one and increasing annual benefits from $24,000 to almost $30,000. Starting to collect your checks early, meanwhile, will shrink them.
The table below shows what percentage of your full benefits you'll receive depending on when you start collecting them:
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Source: Social Security Administration.
The table makes clear how some people may be able to beef up their benefits by 24% -- or possibly even 32%.
Thinking it through
Delaying may seem like a no-brainer move, but consider the big picture:
- Starting to collect later means you'll receive fewer checks overall. Those who start early will collect many more checks.
- For those who live average-length lives, when you start may not matter much -- except to your spouse, as the two of you may be able to maximize benefits via a coordinated Social Security strategy.
- Many people simply can't delay until age 70, as they need that income soon -- perhaps due to a job loss, a health setback, having to care for a loved one, and/or insufficient savings. Those in poor health may be best off starting earlier, too.
- Delaying your entire retirement, if you can do it, can pay off in multiple ways beyond boosting your Social Security benefit. For example, you'll be able to save and invest for retirement for a few more years, and your nest egg will have longer to grow. It will have to support you for fewer years, too.
- One way to pull off delaying Social Security is to draw more from your other retirement accounts, such as IRAs and/or 401(k)s, until you start the Social Security income stream.
Everyone's circumstances and decision-making process will be at least a little different. Take some time to learn more about Social Security, so you can make smart decisions and get more out of the program.
