Americans who are eligible for Social Security retirement benefits can choose to start receiving theirs at any point between the ages of 62 and 70. However, you have a full retirement age for Social Security purposes, and for people born in 1960 or later, this age is 67.
If you choose to claim Social Security before you reach full retirement age, your benefit will be permanently reduced. On the other hand, if you choose to wait, your benefit will gradually get higher.
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Under current law, Social Security retirement benefits grow by 8% per year beyond full retirement age, until as late as age 70. This means that if your full retirement age is 67, and you choose to wait as long as possible, your Social Security benefit could be permanently increased by 24%. But like most retirement topics, there's more to the story.
The increase for waiting could actually be more than 24%
It's also worth noting that in dollar terms, your benefit could increase by significantly more than 24% thanks to any cost-of-living adjustments, or COLAs, that occur along the way. The Social Security Administration (SSA) adjusts benefits to keep up with inflation every year, so if you delay Social Security by three years after your full retirement age, you'll see three years' worth of COLAs reflected in your monthly checks. Sure, the increase will still be 24% on an inflation-adjusted basis, but the dollar amount could be significantly higher.
There's another reason your benefit could increase by even more than 24% if you wait. If you delay Social Security and continue to work, it could also help increase your benefit once you finally start to collect it. The SSA looks at your 35 highest-earning years when determining your initial retirement benefit, so if you're in a higher-earning portion of your career, it can have the added effect of increasing your average earnings.
Other ways to increase your Social Security benefit
Unfortunately, there aren't any big "tricks" to increase your Social Security benefit -- at least not since Congress closed some big loopholes a few years ago.
When it comes to increasing your Social Security retirement benefit, there are only three main ways to do it:
- Wait longer to claim your benefit, which we've discussed here.
- Increase your income.
- Work for 35 years if you haven't already done so.
The Social Security benefit formula considers your 35 highest-earning years, adjusted for inflation. If you haven't worked for 35 years yet, zeros will be used for the missing years to calculate your average. And if you've achieved 35 years of work, but some of the years were extremely low-earning, it could be to your advantage to work an additional year or two in order to replace lower-earning years. For example, one year on my Social Security statement consists of about $1,400 of part-time income during my freshman year of college, and this is certainly dragging down my average for now.
It can also help to boost your income temporarily, although this is often easier said than done. You could pick up a side hustle, as the gig economy has never been more robust, or otherwise increase your earnings. But beyond that, there aren't any secrets to increasing your Social Security benefit.
Is waiting until 70 right for you?
To be perfectly clear, it may not be practical or necessary for you to wait as long as possible to start collecting Social Security. For example, maybe you were forced to retire earlier than you wanted for health reasons, and you need the income, which unfortunately is a very common issue. Or maybe you have several million dollars in assets and retirement savings, and waiting to claim isn't going to make a meaningful difference in your post-retirement quality of life.
On the other hand, maybe you have a family history of longevity and are in good enough health and financial shape to wait until 70.
In any case, it's important to realize that Social Security is designed so the average American will collect roughly the same amount of retirement income throughout their lives, regardless of when they claim. Before you choose to delay Social Security until age 70 to get an extra 24%, it's important to consider all of the pros and cons of doing so.
