Social Security benefits are one of the few guaranteed lifetime sources of income most retirees have. Since you'll always have this monthly payment coming in, it makes sense to try to maximize it -- especially if you're worried your savings might run short and you won't have a ton of other funds.
The good news is, it's possible to increase your Social Security benefits dramatically. In fact, making just one move enables you to raise your check amount by 24%. Here's what it is.
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Doing this could give you a 24% Social Security benefits bump
If you want to raise your Social Security benefit by 24%, you can do that by starting your first check at the age of 70. Here's why.
Every retiree gets a standard benefit at a designated age called their full retirement age (FRA). The standard benefit is based on average wages earned during their 35 highest-earning years (after adjusting for inflation). Retirees also get a choice of when to claim their benefit, and can pick any age between 62 and 70. But starting payments before FRA will result in a reduction to the standard benefit, while starting payments after FRA results in an increase to it.
FRA is between 66 and six months and 67 for those born in 1957 or later. For anyone born in 1960 or after, it is 67. Once you have reached your FRA, each month you wait to get your first Social Security check will result in an increase to your standard benefit of 2/3 of 1% per month.
If you have a FRA of 67 and you wait until the age of 70 to get your first payment, you will have 36 months of benefit bumps. This means delaying this long will add up to a 24% increase in the amount of your standard payment. So, if you would have been on track to get $1,600 a month at age 67 but you waited until 70, your new benefit amount would be $1,984. That's an extra $384 per month, which is enough to cover a car payment or other big expense.
You can only increase your monthly benefit until age 70, so there's no advantage to delaying beyond that age. But if you're hoping to get the biggest monthly check you can, 70 is undeniably the best time to claim benefits.
Does delaying to get a 24% benefits increase make sense for you?
Putting off a Social Security claim until 70 to get a 24% raise is a smart financial move for many people, but not for everyone. There are a few big questions that will help you understand whether delaying your claim is right for you.
First and foremost, think about your ability to wait. If you don't claim Social Security until 70, you have to either work until that age or have other income sources to support you until then. Many people don't want to, or can't, work to 70. And you don't want to drain your entire savings just to afford the basics as you put off your Social Security claim.
Aim to save enough so you don't have to worry about this. But if that doesn't happen, you're better off claiming benefits earlier and forgoing the 24% increase than you would be emptying your savings account.
You'll also need to think about whether you're likely to live long enough to break even for missed benefits. Since you can claim Social Security at 62, you pass up eight years of income if you wait until 70. Your monthly benefit is a lot lower if you claim it earlier, but you get many more checks. Calculate how much extra you'll earn due to your delayed claim and compare that to forgone income due to delaying your payment to try to guess if you're likely to break even before you die.
Finally, consider your spouse. If you die first, your widow(er) gets to keep receiving your benefit if it is larger than their retirement benefit. So, a delay until 70 could pay off and provide more benefits for your surviving spouse than an earlier claim would have -- which means this choice may make sense even if you die before you break even.
Thinking about all these issues can help you decide whether to opt for a delayed claim to squeeze the extra 24% out of Social Security, or whether you decide an earlier claim is best for your circumstances.
