Many retirees rely heavily on Social Security benefits to cover living expenses. While Cost-of-Living Adjustments (COLA) help keep pace with inflation, there’s another, often-overlooked strategy that can significantly increase monthly benefits—by as much as $450—without waiting for COLA increases.
This strategy involves delaying Social Security benefits beyond Full Retirement Age (FRA) up to age 70, allowing retirees to collect delayed retirement credits that can meaningfully boost their monthly income.
How Does Delaying Social Security Increase Payments?
| Feature | Details |
|---|---|
| Non-COLA Benefit Increase | Retirees can boost benefits by delaying their claim up to age 70. |
| Potential Monthly Increase | Approximately $450 more if benefits are delayed until age 70. |
| Average Benefit Check | The average monthly Social Security check is $1,919. |
| Eligibility | Available to those who haven’t claimed benefits or can suspend them. |
| Official Resource | Social Security Administration (SSA) website. |
By understanding the mechanics of delayed retirement credits, retirees can make informed decisions about when to claim benefits, potentially enhancing financial stability throughout their retirement years.
What Is the Non-COLA Increase?
When Americans become eligible for Social Security benefits, they have options: claim benefits early (as soon as age 62), wait until full retirement age (between 66 and 67), or delay up to age 70.
Although claiming early reduces monthly payments, waiting to claim benefits past FRA can increase them significantly—up to 8% per year. For some retirees, this delayed retirement strategy can increase monthly payments by roughly $450, without relying on COLA adjustments.
For instance, someone eligible for $1,919 monthly at their full retirement age of 67 could see their payment rise to $2,380 by delaying until age 70, a monthly increase of $461.
How Delaying Social Security Works: A Step-by-Step Guide
- Determine Your Full Retirement Age (FRA): Your FRA depends on your birth year, generally falling between ages 66 and 67. Claiming before this age reduces your monthly benefits.
- Delay Benefits Beyond FRA: Every month you delay past your FRA, you earn additional retirement credits. These credits add two-thirds of 1% per month to your benefits, totaling an 8% increase annually.
- Maximum Delayed Age: Delayed credits stop accruing at age 70, so it’s ideal to claim by that age to maximize the increase.
- Suspending Benefits: If you’ve claimed benefits but are under 70, you can still suspend them at FRA, allowing delayed retirement credits to accumulate until you restart payments, ideally at age 70.
- Consider Life Expectancy and Health: The delayed strategy provides greater monthly checks but requires careful consideration of health and life expectancy. For those in good health with a longer life expectancy, delaying benefits may result in a higher lifetime payout. Those with urgent financial needs or health concerns may benefit more from claiming earlier.
Real-Life Example
Let’s look at a hypothetical scenario:
- Susan, age 67, qualifies for a monthly Social Security benefit of $1,919.
- She decides to delay claiming until age 70.
- By waiting, Susan’s monthly benefit grows 8% per year, increasing her check to $2,380 at age 70.
Over 15 years (ages 70 to 85), Susan would collect approximately $428,400, compared to about $414,504 if she hadn’t delayed. By waiting, Susan receives an extra $13,896 over 15 years, despite not receiving payments from ages 67 to 70.
Who Should Consider Delaying Social Security?
Delaying benefits isn’t ideal for everyone. Here’s who might benefit most:
- Those with Other Income Sources: Retirees with additional income from pensions or savings may find it feasible to delay Social Security, increasing their future payments without immediate financial strain.
- Healthy Individuals: Retirees with good health and a family history of longevity could benefit from waiting to claim, as the longer they live, the more they benefit from higher monthly checks.
- Couples Using Spousal Benefits: When one spouse has a significantly higher benefit amount, delaying their claim can increase the surviving spouse’s monthly income after their death, providing lasting financial security.
How to Implement the Delayed Strategy
If delaying Social Security aligns with your financial and health situation, here are steps to follow:
- Check Your FRA and Current Benefit Estimate: Log into your My Social Security account to see your benefit estimates at different ages.
- Evaluate Your Income Needs: Consider whether you can meet expenses without Social Security for a few extra years.
- Discuss with a Financial Advisor: A professional can help evaluate if delaying makes sense based on life expectancy, health, and overall retirement plans.
Pros and Cons of Delaying Social Security Benefits
Pros
- Higher Monthly Payments: An 8% annual increase can lead to substantially larger checks over time.
- Inflation Protection: Larger payments provide greater security against inflation, especially when paired with COLA adjustments.
- Spousal Support: For couples, delaying the higher earner’s benefits can ensure a larger survivor benefit.
Cons
- Delayed Income: For retirees needing immediate income, waiting may not be realistic.
- Health Considerations: Those with significant health concerns may benefit from claiming earlier to maximize total payouts.
Additional Tips for Managing Social Security Benefits
- Review Earnings Records: Regularly check your earnings record through SSA to ensure accurate benefits.
- Update Contact Information: Keep your SSA account updated to receive important notifications.
- Consider Partial Retirement: If needed, consider working part-time to supplement income while delaying benefits.
The delayed retirement strategy is a powerful tool for increasing Social Security payments without relying on COLA adjustments. By waiting until age 70, retirees can receive an extra $450 or more per month, potentially securing a higher lifetime payout and greater financial stability.
