The Social Security Filing Decision You Can Make That Guarantees Larger Checks for the Rest of Your Life
Most retirees know that filing Social Security too early shrinks their checks, but far fewer realize there is a specific birthday that unlocks a permanent boost most financial planners consider the gold standard of retirement income strategy.
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As you approach retirement, you may find yourself facing a number of big decisions. When should you start withdrawing from your savings? How much money can you safely withdraw each year? And what expenses should you keep versus shed to ensure that you’re managing your budget well?
Another big decision you’ll have to make is figuring out when to claim Social Security. You can sign up for benefits at any time starting at age 62. But if you want your monthly checks in full, you’ll have to wait until full retirement age (FRA) arrives.
FRA is 67 if you were born in 1960 or later. For each month you file for Social Security ahead of FRA, your benefits are reduced.
A claim that’s two or three months early will only cause a modest drop in your monthly checks. But filing at the earliest possible age of 62 will result in a roughly 30% reduction to your Social Security benefits if your FRA is 67.
You might think that waiting until FRA to claim Social Security is the right choice. But there’s another filing age you may want to consider if your goal is to score the largest monthly paycheck possible.
Waiting to claim Social Security could pay off
While FRA is when you can collect your Social Security checks without a reduction, you don’t have to sign up at that point. You’re allowed to delay your claim past FRA. And for each year you do, your monthly benefits get an 8% increase that lasts permanently.
Now once you turn 70, you no longer get credit for delaying a Social Security claim. So your 70th birthday is the latest you should sign up.
But if you delay a Social Security claim until 70 with an FRA of 67, you’ll boost your monthly benefits by 24% for life. And that’s not all. If you grow your benefits with a delayed claim, every time Social Security gets a cost-of-living adjustment (COLA), you’ll get a larger boost.
This year, for example, benefits got a 2.8% COLA. But someone getting a $2,000 benefit received less of a raise than someone with a $3,000 benefit. So the more Social Security you start out with, the more generous your COLAs should be.
Finally, if you’re married, a delayed Social Security claim could put more money in your spouse’s pocket, too. If they outlive you and are the lower earner in your household, they should be eligible for survivor benefits from Social Security equal to your monthly checks.
If you delay your Social Security claim until 70, your spouse’s survivor benefits could be 24% higher than what they would receive for you filing at FRA. That could make a huge difference if you pass away many years before your spouse does.
Think carefully before you claim benefits
Delaying Social Security past FRA is not the right move for everyone. If both you and your spouse have health issues and don’t expect such long lifespans, an earlier claim could make more sense.
Also, if you find yourself forced out of a job and can’t make ends meet without Social Security, then you’re generally better off claiming benefits sooner rather than relying on debt to pay your expenses. The same holds true if you have pressing expenses you can’t put off, and your choice is to take benefits sooner or rack up hefty financing charges.
But either way, make sure to put a lot of thought into your claiming decision. And if your goal is to walk away with the largest monthly payday, you may want to take steps ahead of time to pull off a delayed claim.
That could mean boosting your job skills so you’re more likely to be able to keep working or coming up with another way to cover your costs until your 70th birthday arrives.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
