Social Security rewards filers who don't rush to take benefits. You're allowed to sign up for Social Security as early as age 62. But filing at that point will mean having to accept a reduced benefit for life.
You're not entitled to your full monthly Social Security benefit based on your income history until you reach full retirement age, or FRA. FRA falls out at 67 for anyone born in 1960 or later. If you were born earlier, FRA is 66, or 66 and a certain number of months.
You'll also snag a much higher monthly benefit from Social Security if you delay your filing past FRA. For each year you wait, up until age 70, your benefit grows 8%. And that boost, to be clear, is a permanent one, just as any reduction you face by claiming Social Security early is generally set in stone as well.
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In order to delay your Social Security claim until age 70, you may need to resign yourself to working longer. And that may not be ideal. But if you're willing to make that sacrifice, you could potentially boost your monthly Social Security checks by almost $2,000 apiece -- for life.
When patience pays off
This year's maximum monthly Social Security benefit at age 62 is $2,572. And the maximum monthly benefit at age 70 is $4,555. The difference between the two is $1,983 -- and that's a pretty large sum of money. All told, it's almost $24,000 extra in Social Security income per year.
If the idea of that higher paycheck sounds good to you, then do what you can to make it happen. You may need to prepare to work until the age of 70 to hold off on Social Security until then. But clearly, you'll be rewarded big time for extending your career.
If you have a lot of savings, then you may not have to work longer in order to delay your Social Security filing. You might instead be able to simply tap your nest egg and take withdrawals to cover living expenses, while letting your monthly Social Security benefit grow.
Of course, if you really have a large amount of savings, you may not care so much what Social Security pays you. But if you have a nest egg that's large enough to tap for a few years but not so large that you're willing to forgo extra Social Security income, then this plan makes a lot of sense.
Should you wait as long as possible to claim Social Security?
The one good thing about snagging a higher monthly Social Security benefit is that it's yours for life. You might, by contrast, start out with a few million dollars in retirement savings only to have your balance dwindle through the years due to stock market conditions.
As such, if waiting until age 70 to claim Social Security is feasible for you, it's a move that might really make sense financially. But if you're utterly miserable at your job and can't bear the thought of working longer, then it could be a better bet to retire, claim Social Security, and settle for a lower monthly benefit. The same holds true if you're not comfortable retiring in your 60s and living off of savings for several years.
