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