Social Security checks saw a significant increase at the start of the year, but they still aren’t going as far as many would like. Most people think they are stuck with what they get because the government sets the benefit formulas. But if you understand how these formulas work, you can identify strategies that will help you get the most out of the program.
Here’s a move that could add up to 24% to your monthly Social Security checks, and it’s an option for those who are already claiming and those who haven’t signed up yet.
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It’s all about timing
There are two main factors that influence the size of your Social security benefits: your income during your working years and your age at registration. Most people understand that more income during your career translates into bigger social security checks in retirement. But not everyone is so familiar with how age shapes our benefits.
The government assigns each a full retirement age (FRA) based on their year of birth. For most people alive today, it is between 66 and 67 years old. You must wait until this age to register for Social Security if you want to receive all the benefits you have earned based on your work history. But you can start claiming at age 62 if you want.
The consequence of this is smaller monthly checks. The government slightly reduces your benefit for each month you claim benefits under your FRA. Or, in other words, it rewards you for every month you delay benefits after becoming eligible. And it doesn’t stop when you reach your FRA.
You can keep your checks growing by delaying benefits until you turn 70. This is when you are eligible for your maximum benefit. Your checks will increase by two-thirds of 1% per month between your FRA and 70. So for the majority of workers today who have an FRA of 67, it is possible to increase your checks by up to 24% simply pending 70 to apply.
Of course, that’s not feasible — or even sensible — for everyone. Some people need to start Social Security earlier so they can pay their bills. And others may not live to age 70 or live long enough to make deferring benefits worthwhile. Generally, you should live to your mid-80s or beyond so delay until age 70 to help you claim a larger lifetime benefit.
But even if you can’t or don’t choose to delay benefits that long, you can still boost your checks a bit by delaying Social Security for a few months or years. You will increase your checks from five-twelfths of 1% per month to two-thirds of 1% per month, depending on your age at the time. Delaying a year could increase your benefits by 5-8%.
What if you are already claiming?
Delaying Social Security to maximize your lifetime benefits is easier to do when you haven’t started claiming yet. But seniors who already receive checks still have a few options to increase their monthly benefit amount.
If you started applying for Social Security within the last year, you may be able to withdraw your application for Social Security. But to do this, you must repay all money that you and anyone else claiming on your work record have received from the program to date.
The government treats those who succeed as if they had never applied for social security before. They can continue to accumulate deferred retirement credits until they are ready to reapply. But this is a one-time deal. The second time you claim, you cannot reconsider your decision.
Those who have been receiving Social Security benefits for more than a year or those who are unable to repay the money they have received so far can still suspend their benefits once they reach their FRA. . If you do this, the government will stop sending you checks until you request they start again or you turn 70. During the period that you are not receiving Social Security, your checks will increase by two-thirds of 1% per month, as mentioned.
But this strategy only works if you’re able to fund your retirement without social security for a while. Those unable to do so will no longer be able to increase their checks. However, they can still expect annual increases in benefits thanks to cost of living adjustments (COLA).
It is ultimately up to you to decide when to apply for Social Security. But if you weren’t sure how your age affects your checks, you might want to review your plan. You can always change your mind if your circumstances change as you approach retirement. But having a claims strategy in place can go a long way in helping you understand how much you need to save for retirement all alone.