Making the most of your Social Security can be one of the keys to financial security in retirement. Fortunately, there are simple ways you can increase the amount of income you collect. In fact, just one smart move could turn an $1,800 benefit into a $2,232 monthly check.
If you want to grow your retirement income and have more money to spend in your later years, here’s how you can give your benefit a big boost.
How can you turn an $1,800 Social Security check into a $2,232 payment?
If you are on track for an $1,800 Social Security check at your full retirement age, and you’d rather that payment be bigger, you can make that happen simply by waiting to claim your Social Security retirement checks.
See, seniors can claim benefits at any age from 62 to 70. But, to try to equalize out the income early and late claimers get, the Social Security Administration has a system of early filing penalties and delayed retirement credits. If you claim before your FRA (which is 67 for anyone born in 1960 or later), you see your benefits shrink. If you claim after FRA, though, benefits increase.
The increase in benefits happens at a rate of 2/3 of 1% per month, or 8% per year. So if you are starting out with a standard benefit of $1,800, your full retirement age is 67, and you wait until 70 to start benefits, you earn three years of delayed retirement credits. This can grow your check by 24%. Some quick math shows that your $1,800 per month Social Security income turns into a $2,232 monthly benefit in this scenario because you waited to claim it.
Should you delay your benefits claim for a larger future income?
Getting an extra $432 every month seems like great news for a retiree, especially since many seniors have faced financial struggles in the post-pandemic era. But the obvious issue, of course, is that the extra money comes at the price of a delayed claim.
If you wait to start your retirement checks from 67 to 70, you don’t break even right away. You must get the large extra payment for years before you find yourself better off because you waited. You’re passing up three years of $1,800 checks by delaying from 67 to 70, so you are missing out on $64,800 in income from Social Security. In exchange, you get $432 extra per month starting at age 70. So at a rate of $432 per month, it takes you 150 months to make up for the income you missed. If you live long enough (just over 12.5 years), then you get more lifetime income due to delaying.
It’s also worth noting that delaying your benefits claim helps out your spouse as well, if you were the higher earner. If you die first, your spouse can collect survivor benefits. But an early claim reduces those, while a late claim increases them. Your spouse can keep the entire benefit you were collecting when you pass on, so the extra $432 per month you earned could help them out a lot once they’ve been widowed.
You ultimately need to think about many factors, including whether you need Social Security to retire or can live on savings. By taking into account your life expectancy, options to cover living costs, employment opportunities available late in life, and the needs of your spouse, you can make an informed choice. For many, that choice will involve getting the extra $432 a month — but you need to decide what makes sense for you.
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