Social Security can have an enormous impact on your retirement. As of 2023, around 37% of men and 42% of women depend on their benefits for at least half of their retirement income, according to the Social Security Administration. If you're expecting your benefits to make up a substantial portion of income in your senior years, it's wise to ensure you're maximizing your monthly payments.
There's not necessarily a right or wrong strategy when it comes to Social Security. But there is one move you can make that can increase your annual income by tens of thousands of dollars -- and it requires less effort than you might think.
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How your age affects your benefit amount
One of the most important factors impacting your monthly payments is the age at which you begin claiming. You can file for Social Security anytime after you turn 62 years old. But to collect the full benefit amount you're entitled to, based on your work history, you'll need to wait until your full retirement age (FRA) to file.
Your exact FRA will depend on your birth year, but it's age 67 for anyone born in 1960 or later. For every month you begin claiming before your FRA, your benefits will be reduced. If you have an FRA of 67 and you file at 62, your payments will be permanently reduced by 30%.
However, if you wait until after your FRA to file (up to age 70), you'll collect your full benefit amount plus a bonus of at least 24% per month. This adjustment is also permanent, so if you delay benefits, you'll collect larger checks every single month for the rest of your life.
An $11,664 boost in benefits
The boost in benefits you'll receive by waiting may not sound like much but can add up substantially.
As of March 2023, the average retiree collects around $1,800 per month from Social Security. Let's say that's how much you'd receive if you were to file for benefits at your FRA. In this case, if you claim early at 62, it would result in a monthly payment of $1,260 per month, after the 30% reduction. But if you were to delay benefits until age 70, you'd collect your full $1,800 per month plus a 24% bonus, amounting to a total of $2,232 per month.
The difference, then, between claiming at 62 and 70, would amount to $972 per month, or $11,664 per year. If you're going to be relying on Social Security heavily in retirement, that extra money could make the difference between financial security and struggling to make ends meet.
Is it really worth it to delay Social Security?
Delaying Social Security can be a smart move if you're looking to maximize your monthly income. Also, if you have reason to believe you may have a much longer-than-average lifespan, those larger checks could go a long way later in life if your savings run dry.
That said, delaying benefits won't be the right strategy for everyone. There are situations where you may be better off claiming early, such as:
- You're battling health issues: This isn't an easy topic to think about. But if you have reason to believe you may not spend decades in retirement, it can sometimes be smart to claim Social Security sooner rather than later. You'll receive smaller checks each month, but you'll also have more time to enjoy your money than if you'd waited to file.
- You're forced into an early retirement: Not everyone has the luxury of choosing when to retire. Although you don't have to start taking Social Security immediately when you retire, if you're relying entirely on your retirement fund to make ends meet, you may risk running out of savings too quickly.
- You have a strategy with your spouse: If you and your spouse are both entitled to Social Security, you may choose to strategically file at different ages. For example, one of you may choose to file early to provide some extra income earlier in retirement, while the other delays benefits to earn those larger checks.
Delaying Social Security can be a fantastic way to increase the size of your monthly payments, potentially boosting your income by tens of thousands of dollars per year. By weighing the pros and cons of when to file, you can decide whether delaying benefits is the right move for your situation.
