Did you know you can make your Social Security payments 24% larger than your standard benefit? Doing so could help you more easily pay for all of your essential costs, especially later in retirement when your money might be tight.
So how can you get this big profit boost? This is what you should do.
Timing is key to collect an additional 24% each month
If you want a larger Social Security check than your standard benefit, you can do so by postponing your initial claim until long after you’re first eligible for benefits.
You can receive Social Security checks anytime between the ages of 62 and 70. However, based on your year of birth, your full retirement age (FRA) determines when you’ll get your standard benefit amount (also called your primary insurance amount, or PIA). ).
Your FRA is between 66 and four months and 67 if you were born in 1956 or later. If you claim your first Social Security payment exactly at that time, you’ll get benefits equal to a percentage of your average salary during the 35 years when your inflation-adjusted earnings were highest.
But this is where the opportunity to increase your profits comes in. During any month you wait to receive your first payment after the FRA, your standard benefit increases by two-thirds of 1%. If you do the math on this, that means your payment will increase by 8% per year.
However, you can increase your standard benefit only up to age 70. So if you have an FRA of 67, you can increase your Social Security benefit by 24%, but no more than that.
Do you have to postpone your claim for benefits to get a 24% increase?
There are downsides to waiting until age 70 to claim your first retirement check, so you can’t always assume this is the right move for you, even if it increases benefits by 24%.
Obviously, if you’re waiting until age 70 to claim retirement benefits, you’re giving up years of payments you could have collected. In fact, you can claim Social Security for the first time at age 62, well before your FRA, although this would result in early filing penalties that would also reduce your benefit below its standard amount.
But even after giving up years of checks, you can still break even because of the higher monthly payments you get as a result of waiting, but only if you live long enough to receive enough checks. It can be many years before that happens, so if you have health problems and don’t expect to live long, an earlier claim might be better.
However, postponing benefits until age 70 can increase your chances of earning the most lifetime income, because many people exceed typical life expectancies and earn larger checks for longer than they need to break even. For example, someone with an FRA of 67 who qualifies for Social Security’s average 2022 benefit of $1,661 would need to live to at least age 82 to break even. That may seem daunting at first glance, but most people currently in their 50s and 60s are expected to be in their 80s.
If you were the higher earner, a delayed claim may also increase the survivor benefits your partner is entitled to. This is because the longer-living spouse can continue to collect the larger of the two Social Security checks that came into the home while both people lived.
So if you think you’ll live to age 80 or you were the top earner and want to make sure your spouse is well taken care of, it’s usually worth waiting until age 70 to get this 24% benefit increase to claim. your first Social Security. check.