You probably know that bigger Social Security checks come to those who wait. But you may be surprised by just how much you can boost benefits by waiting.
The maximum benefit for someone claiming Social Security at age 62 in 2023 is $2,572. But checks can be as high as $4,555 for someone starting benefits at 70 in 2023. That's a difference of $1,983 a month.
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How to raise your Social Security benefit by 77%
A typical worker won't get a $1,983 monthly boost for claiming benefits at 70 versus 62. The average benefit for retirees is just $1,827 as of January 2023. To get the full $1,983 per check for holding out until 70, you'd have to qualify for Social Security's maximum benefit of $4,555 -- a feat that's extremely difficult to accomplish because you have to be a top earner for 35 years.
But even if you're on track to collect a more modest Social Security check, delaying can have a meaningful impact on your retirement budget. Waiting until you're 70 to collect benefits results in a monthly check that's about 77% higher than if you claim as soon as you're eligible at 62.
How Social Security's formula works
Your Social Security benefits are based on your primary insurance amount. That's the benefit you'll receive at full retirement age, which is 67 for anyone born in 1960 or later.
If you start benefits early, Social Security reduces your benefit by five-ninths of 1% for each month, up to 36 months. If you retire more than 36 months early, your benefit is reduced by five-twelfths of 1% for each additional month. Retiring five years early results in a benefit that's 30% lower than your primary insurance amount.
But suppose you've just turned 67 and are eligible for your full benefit. You'll receive an 8% delayed retirement credit for each year you wait until you max out your benefit at age 70.
Let's use someone whose primary insurance amount is $1,500 a month. Claiming at age 62 would lower that monthly benefit to $1,050. But postponing that benefit until age 70 would push the value of that monthly check to $1,840 -- a $790-per-month difference.
Should you wait until 70 to start Social Security?
A 2022 National Bureau of Economic Research working paper estimates that 90% of American workers aged 45 to 62 would benefit from delaying Social Security until age 70. The paper's authors project that a median household headed by a worker in this age group will reduce the household's lifetime discretionary income by $182,370 in today's dollars.
But few workers wait to collect the maximum benefit. According to Social Security data, the median claiming age is 64.7 for men and 64.6 for women.
For many Americans, the decision is less about maximizing benefits and more a matter of survival. Older people are vulnerable to layoffs and age discrimination in the workforce. Many seniors have to give up work early because they have medical issues or need to care for an ailing partner. When someone is forced to retire early, starting Social Security early is often a matter of survival.
But for those who have some flexibility, delaying can pay off significantly, particularly when your retirement savings are lacking. Postponing benefits while continuing to work is especially beneficial when you need to make up for lost investing time. In this scenario, you're not just allowing your future Social Security check to grow. By working, you can avoid drawing from your retirement accounts and continue to save, giving your money more time to compound.
Also, delaying benefits doesn't necessarily mean you need to wait until you're 70. But holding off just a tad longer than you planned could be advantageous. For instance, if you planned to retire at 64 but waited until age 66, you could increase your checks by 13.33% per month.
If you have plenty of working years ahead of you, it's essential to invest early to allow your money time to grow. Doing so will buy you the freedom to start benefits on your schedule because you won't need to squeeze every last penny out of Social Security.
