Social Security is an integral source of income for millions of retirees, and 76% of American adults say optimizing their benefits is more important than ever, according to a 2022 survey from the Nationwide Retirement Institute.
Fortunately, it is possible to increase the size of your monthly payments. And there’s one move, in particular, that could potentially boost your checks by more than $10,000 a year.
How your age affects your benefit amount
The age at which you apply for Social Security is perhaps the most important factor influencing your benefit amount.
Age 62 is the earliest you can start claiming, or you can file at any age thereafter. Your Full Retirement Age (FRA) is the age at which you will receive the full benefit amount to which you are entitled based on your career earnings. For those born in 1960 or later, their FRA is 67 years old.
You can also delay benefits beyond your FRA, and if you wait until age 70 to apply, you’ll receive the most benefits possible.
Delaying benefits may not be ideal (after all, few workers want postpone retirement until later in life), but it could substantially increase your annual income.
How to increase your Social Security by $10,000 per year
The average benefit amount as of August 2022 is about $1,673 per month, according to the Social Security Administration.
Let’s say, for example, you have a 67-year-old FRA, and by applying at that age, you would receive $1,673 per month. If you started claiming at age 62, your benefit amount would be permanently reduced by 30%, leaving you with about $1,171 per month, or $14,052 per year.
On the other hand, if you delay benefits until age 70, you will receive the full amount of your benefits plus an additional 24%. That works out to around $2,075 per month, or $24,900 per year. In all, that’s $904 per month (or $10,848 per year) more than you would receive if you filed at age 62.
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When you should (and shouldn’t) delay Social Security
Waiting until age 70 to claim benefits can be a great way to increase your monthly income, and if your savings are running short, delaying benefits might be a smart move.
This strategy might also be smart if you have reason to believe it will have a longer-than-average shelf life. The longer you live, the more likely your savings will eventually run out. If that happens, an extra $10,000 a year in Social Security benefits could go a long way.
That said, delaying Social Security isn’t right for everyone. If you think you may live a shorter than average life, for example, you could actually receive more over your lifetime by claiming early. Although each check will be smaller, you will collect more payments in total compared to if you had delayed benefits.
Claiming early may also be a good idea if you are forced to retire early due to job loss or health problems. You don’t have to apply for Social Security as soon as you retire, but if you retire at age 62 and delay benefits until age 70, you risk depleting your savings too quickly.
There is no single correct answer for when you should apply for Social Security. By claiming at the right age for your situation, it will be easier to maximize your Social Security.