Social Security retirement benefits can help you cover the bills after you stop getting paychecks. You'll be guaranteed this income for life. And with cost-of-living adjustments built into the Social Security benefits system, you can count on your benefits to retain most of their buying power throughout your lifetime.
Since these benefits are important, it's worth trying to maximize the income you receive from them. The good news is there's a move you can make in retirement that will enable you to significantly increase the monthly payment you get. In fact, depending on your situation, you could increase your payment by as much as $1,983. Here's how.
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How to make your Social Security check grow a lot bigger
If you want to boost your Social Security benefit by as much as $1,983 per month, you have to do one thing: Wait to claim your payment until the age of 70, even though you first become eligible for Social Security at 62.
See, the maximum monthly Social Security check at 62 is $2,572, but the maximum monthly check at 70 is $4,555. Some quick math shows a $1,983 difference between those two payments. The reason for this can be chalked up to the Social Security system being designed with the goal of balancing out the lifetime income you receive no matter when you claim benefits. So those who claim benefits early get a greater number of smaller checks, and those who claim late get fewer but bigger checks.
Now, your benefit may not increase a full $1,983 even if you wait until age 70. The specific amount of your benefits increase depends on what your standard benefit is.
The way it works is that you get a standard benefit equal to a percentage of average wages during your 35 highest earning years. The standard benefit is available if you claim it at full retirement age (FRA). It's reduced if you claim before FRA and are hit with early filing penalties, and it's increased if you delay beyond FRA and earn delayed retirement credits (available until 70).
Some people max out their standard benefit by earning a very high amount of income each year (equal to at least the "wage base limit," which is the maximum amount of income subject to Social Security tax and used to calculate benefits). Those with the maximum standard benefit have the potential to increase it to the maximum possible -- $4,555 -- by delaying.
If your standard benefit is below the maximum possible amount because your earnings were below the wage base limit during at least some of your career, you can still substantially increase your monthly Social Security check.
How much will your benefits increase be?
To calculate how much extra income you'd get by waiting until age 70 to claim benefits, here are the steps you'll need to take:
- Figure out your standard benefit amount. You can find this out at mySocialSecurity.gov.
- Determine how much your benefit would be if you claimed it at 62. Do this by applying early filing penalties of 5/9 of 1% for each of the first 36 months you claim before your full retirement age and 5/12 of 1% for any prior month. If your FRA is 67 and you claim at 62, you'd reduce your standard benefit by 30%. So if you were on track for an $1,800 standard benefit, claiming it at 62 would reduce it to $1,260.
- Determine how much your benefit would be if you claimed it at 70. Do this by applying delayed retirement credits of 2/3 of 1% of your standard benefit for each month until 70. If your FRA is 67, you'd increase your benefit by 24%, so the $1,800 would turn into $2,232.
- Calculate the difference between claiming at 70 versus 62. In this case, you'd increase your benefit by $972 a month if you delayed.
As you can see, no matter what your standard benefit is, waiting until 70 to claim it instead of starting it at 62 will result in a dramatic increase. You will be giving up eight years of income, though, so that needs to be considered. But if your goal is to get the largest monthly Social Security, delaying is a no-brainer.
