If you want a bigger Social Security benefit, there's a surefire way to get it. You become eligible for benefits starting at age 62. But if you wait to claim your retirement payments, the amount you get each month increases. In fact, you can continue to raise your benefit amount until age 70, at which point your payments won't get any bigger, even if you put off claiming for longer.
Getting more money each month can be great for retirees, but since doing so means delaying the start of your checks, you'll want to try to be sure waiting is going to pay off in the end. Here's how you can do that.
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Do this to see if a delayed Social Security claim makes sense for you
The first thing to know is that waiting to claim Social Security beyond your full retirement age benefits you only if you are claiming retirement benefits on your own work record. Spousal benefits do not increase after you've hit FRA so there's no reason to delay those.
If you are claiming your own benefits and want to determine whether delaying your Social Security claim is the right move, the key is to calculate your break-even point. That's the point at which the bigger checks you're getting due to delaying your benefit have provided so much extra income that you've made up for all the money you passed up while waiting to grow your benefit.
Let's say, for example, you claim Social Security at 70, even though you could have started at 62. Sure, your monthly payment will be much bigger, but you will have passed up eight full years of payments. To see whether that makes financial sense, you have to look at how long it will take for the extra payments to make up for those missing eight years of income.
How to calculate your break-even point
The good news is that calculating your break-even point is pretty simple. Here's what you should do:
- Determine how much your Social Security benefit would be at two different ages (like age 62 versus age 70). You can sign into your mySocialSecurity account to determine how much you'll get at each age.
- Figure out how much income you'll miss due to delaying your benefit. Say you would have received a $1,120 benefit if you'd started it at 62. If you pass up eight years of payments, you'd be giving up $107,520.
- Calculate how much higher your delayed benefit will be. If your payments would've been $1,120 at 62 and your full retirement age is 67, your benefit at 70 would have grown to $1,984. So, it would be $864 higher than if you'd started at 62.
- Divide the missed income by the extra amount you'd get each month. Since $107,520 divided by $864 is 124.44, you'd break even for your missed benefits in about 124.4 months or 10.37 years.
Once you've determined your break-even point, you'll know just how long it will take for a delayed Social Security claim to pay off. In the above example, once you'd lived to 80.37 years old, if you were still alive and kept getting checks, you'd end up with more lifetime benefits by claiming at 70. If you passed away before then, you'd end up with less.
However, there is one caveat. If you're married and were the higher earner in your family, delaying your claim could lead to a bigger survivor benefit for your spouse if you pass away first. So, even if you don't personally live long enough to break even, your delayed claim could give your widow more money to live on after you're gone. Be sure to take this into account when you make your choice as well.
The bottom line is, doing this calculation is crucial to making the smartest possible choice about the best age to get your first Social Security check.
