When it comes to a comfortable retirement for many Americans, every single dollar is precious.
That’s why it is ultra-important to make the right decisions regarding one’s Social Security benefits—as they could mean the difference of tens of thousands of dollars in the years ahead.
Pays to Wait
The one clear fact highlighted by most financial planners is that it is indeed a prudent money-related decision to delay filing for benefits for as long as possible.
“Workers planning for their retirement should be aware that retirement benefits depend on age at retirement. If a worker begins receiving benefits before his/her normal (or full) retirement age, the worker will receive a reduced benefit. A worker can choose to retire as early as age sixty-two, but doing so may result in a reduction of as much as 30 percent,” the Social Security Administration (SSA) writes.
“Starting to receive benefits after normal retirement age may result in larger benefits. With delayed retirement credits, a person can receive his or her largest benefit by retiring at age seventy,” it continues.
A finance expert from the Motley Fool also outlined the outsized benefits of waiting to file past full retirement age (FRA), which is currently sixty-six and two months (full retirement age will gradually rise to sixty-seven over the next several years). In fact, there could be a 24 percent raise that’s ready to be taken advantage of.
“You’re allowed to sign up for benefits before FRA, or later. The earliest you can file for Social Security is age sixty-two, but for each month you sign up ahead of FRA, your benefit gets reduced. The opposite happens if you delay your filing past FRA. For each month you hold off, your benefit will increase by about two-thirds of 1 percent. That means that for each year you wait to sign up, your benefits will grow 8 percent,” she writes.
“Once you turn seventy, you can no longer accrue the delayed retirement credits that cause your benefits to grow. But if your FRA is sixty-seven and you delay your filing until the age of seventy, you’ll snag a 24 percent boost to your Social Security income that will remain in place throughout your retirement,” she adds.
For example, if a retiree is entitled to $1,500 a month in Social Security benefits at FRA, then waiting till age seventy will give that individual $1,860 per month—an annual income boost of more than $4,300.
It is also important to keep in mind the absolute maximum benefits allowed by the SSA. For individuals at FRA, the maximum amount is $3,113. For those who decide to collect at age sixty-two, the amount will only be $2,324, and at seventy, the total rises to $3,895.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.