Social Security benefits can make or break retirement for millions of seniors. 85% of retirees depend on their monthly checks.
If your benefits will comprise a substantial portion of your retirement income, it is prudent to maximize them. There is a straightforward way to increase your monthly payments by 24% for the remainder of your life. Here’s how.
How To Calculate Your Social Security Benefits
There are numerous factors that determine the size of your checks, but one of the most significant is the age at which you begin receiving benefits.
You can apply for Social Security at any time after turning 62, but the earlier you apply, the smaller each payment will be. For those born in 1960 or later, the full retirement age (FRA) is 67.
If your FRA is 67 and you file for benefits at age 62, 30 percent of your benefit will be reduced. Alternatively, if you wait until age 70 to start receiving benefits (after age 70, waiting does not result in additional benefits), you will receive your full monthly benefit plus 24%.
Financial Benefits of Delaying Retirement Benefits
When to apply for benefits cannot be determined with absolute certainty. The most compelling reason to delay, however, is to increase your monthly income.
According to the most recent data from the Administration, the average monthly retirement benefit is approximately $1,800. (SSA). If you begin receiving this amount at age 67, waiting until age 70 would add $432 per month ($5,184 per year). If you are cash-strapped in retirement, that can go a long way.
Delaying benefits may also be prudent if you expect to outlive the average lifespan. In theory, you should receive the same total benefit amount regardless of when you apply. You will receive smaller payments over a longer period of time if you file your taxes early. If you delay receiving benefits, you will receive fewer, but larger, checks.
However, these calculations are based on the assumption that you will live a typical lifespan as determined by the Administration. Delaying could result in significant lifetime savings if you end up living much longer than expected.
Moreover, if you run out of savings in your later years, larger checks can make it easier to make ends meet.
Delaying retirement can be financially advantageous for many retirees, especially if their savings fall short. The additional 24% can add up to hundreds of dollars per month, allowing you to live in greater comfort during your golden years.
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