Claiming Social Security benefits can be a complex process because there are lots of rules and qualifications that impact how much retirees receive, and it's not always so easy to obtain accurate information.
But the amount of money you can claim in monthly benefits can vary greatly based on a multitude of factors, including when retirees claim Social Security, how long they work, and how much they make over their careers. Here's how to score an additional $1,983 per Social Security check or $23,796 annually.
Choosing when to claim benefits
Retirees have fairly wide discretion over when they can start claiming Social Security benefits. They can claim them as early as the age of 62 or as late as the age of 70, but the age you claim benefits plays a big role in determining the size of monthly Social Security checks.
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When a retiree claims benefits early, there is a penalty, which can be as much as a 30% haircut on your primary insurance amount (PIA), the benefits a retiree is entitled to at their full retirement age (FRA), which is 67 for those born in 1960 or later. The Social Security Administration (SSA) decreases benefits by 5/9 of 1% for each month benefits are taken before your FRA. After 36 months, benefits are reduced by 5/12 of 1%.
However, when you claim benefits later, your benefits increase by 2/3 of 1% for each month you delay, which amounts to 8% per year or 24% total over the three years delayed. As you can see, determining when you claim benefits can make a big difference in how much you ultimately make.
Keep in mind, however, that how much you'll receive in benefits also depends on how long you work and how much you make. When calculating your PIA, the SSA uses a retiree's highest 35 years of earnings. To receive the maximum benefit, retirees also must earn -- and therefore pay taxes on -- the maximum amount of wages that SSA can tax each year, a number known as the benefit base.
The benefit base is usually equivalent to a salary only made by high-income earners, and it often increases to keep up with inflation, so it can be tough to keep up with each year. For instance, the benefit base in 2022 was $147,000. This year, due to extremely high inflation last year, the benefit base rose all the way to $160,200.
How to score that extra $1,983
Even though it's difficult to qualify for the maximum Social Security check because of the earnings one must make, if you do happen to qualify and then take Social Security as early as possible at age 62, the maximum monthly Social Security check is $2,572.
However, if you wait until age 70, the maximum monthly Social Security check is $4,555, which equates to a difference of $1,983.
While retirees can certainly boost their monthly Social Security checks by delaying benefits, that really shouldn't be the driving factor in determining when to claim benefits. The decision should boil down to a person's financial and health status. If you can afford to wait, it definitely makes sense, but sometimes you can't.
