Applying for Social Security benefits can be a complex process as there are many rules and qualifications that impact how much retirees receive, and accurate information is not always so easy to obtain.
But the amount of money you can claim in monthly benefits can vary widely depending on a host of factors, including when retirees apply for Social Security, how long they work, and how much income they earn during the course. of their career. Here’s how to score an extra $1,983 per Social Security check or $23,796 a year.
Choose when to apply for benefits
Retirees have fairly wide discretion over when they can start claiming Social Security benefits. They can claim them as early as age 62 or until age 70, but the age at which you claim the benefits plays a large role in determining the amount of monthly Social Security checks.
When a retiree claim benefits sooner, there is a penalty, which can be up to 30% on your Primary Insurance Amount (PIA), the benefits a retiree is entitled to at Full Retirement Age (FRA), which is 67 for people born in 1960 or later. The Social Security Administration (SSA) decreases benefits by 5/9 of 1% for each month of benefits taken before your FRA. After 36 months, benefits are reduced by 5/12 of 1%.
However, when you apply for benefits later, your benefits increase by 2/3 of 1% for each month of delay, which equals 8% per year or 24% in total over the three years of delay. As you can see, determining when you apply for benefits can make a big difference in how much you ultimately earn.
Keep in mind, however, that the amount you will receive in benefits also depends on how long you have worked and your earnings. When calculating your PIA, the SSA uses a retiree’s best 35 years of earnings. To receive the maximum benefit, retirees must also earn — and therefore pay taxes on — the maximum amount of wages the SSA can tax each year, a number known as the benefit base.
The benefit base usually equates to a salary only received by high earners, and it often increases to keep up with inflation, so it can be difficult to track each year. For example, the benefit base in 2022 was $147,000. This year, due to last year’s extremely high inflation, the benefit base has increased to $160,200.
How to score that extra $1,983
Although it is difficult to qualify for the maximum Social Security check due to the income one must earn, if you are eligible and then take Social Security as early as possible at age 62, the monthly maximum Social Security the check is for $2,572.
However, if you wait until age 70, the maximum monthly Social Security check is $4,555, which equates to a difference of $1,983.
While retirees can certainly increase their monthly Social Security checks by delaying benefits, that really shouldn’t be the determining factor in determining when to apply for benefits. The decision should come down to a person’s financial and health status. If you can afford to wait, it makes sense, but sometimes you can’t.