The amount of your Social Security benefit can vary dramatically based on decisions that you make. In particular, the age at which you choose to claim benefits can have an especially profound impact on the amount of money you end up with. In fact, you could potentially increase your monthly payment by as much as $1,830 per month just by being smart about when your first payment comes.
A delayed claim can have a huge impact
You become eligible for Social Security benefits at the age of 62. But if you want the largest possible monthly check, you’re going to need to put off filing for benefits much longer.
While the maximum monthly Social Security check at 62 is $2,364 in 2022, the maximum monthly benefit at 70 is $4,194 per month. Some quick math shows that an eight-year delay before claiming benefits ends up increasing your check amount by $1,830 per month.
Why does this happen? It’s because of the way Social Security is designed.
Seniors have the choice to retire and claim benefits at a younger age or at an older one. But the goal of Social Security is to equalize the amount retirees get, regardless of when they actually receive their first check. As a result, a system of early-filing penalties and delayed retirement credits applies.
Every retiree is assigned a full retirement age (FRA) based on when they were born. Those who claim at their FRA get their standard benefit, which is calculated based on a percentage of inflation-adjusted earnings in the 35 years they made the most money over their careers.
Anyone who starts checks before FRA is hit with monthly early-filing penalties, though. And anyone who starts collecting checks after FRA can earn delayed retirement credits that increase their monthly payments.
If you claim Social Security at 62, your maximum benefit will be much smaller because you’ll be hit with delayed retirement credits for every month between 62 and your FRA. If your FRA is 67, this early claim will reduce payments by a whopping 30%. On the other hand, if you wait until 70, you’ll max out your delayed retirement credits and be on track for a much larger benefit — as much as $1,830 bigger.
How much can you increase your benefit by delaying?
An $1,830 increase to your Social Security check is the largest possible benefit increase you can get by delaying. It’s available only if you were on track to have the highest possible standard benefit.
You’d be on track for this only if you earned the maximum income subject to Social Security tax each year. Many people don’t have such substantial earnings, so the actual amount you can increase your benefit check is based on what your own standard benefit would be.
Say, for example, you were on track to get a $1,600 Social Security payment at a full retirement age of 67. If you claimed it at 62, you’d shrink that $1,600 by 30% and would receive an $1,120 monthly benefit. But if you waited until 70 and maxed out your delayed retirement credits, you’d get a $1,984 payment. So your check would be $864 higher. That’s still a huge increase.
You can find out your estimated standard benefit by checking your mySocialSecurity online account and then use that info to figure out how much a delayed claim would increase your checks.
Just remember, though, that when you put off your claim for benefits for eight years to increase future payments, you give up a lot of potential income you could have received. Be sure to calculate how long it will take to break even for the delay by estimating how many months of higher checks it will take to make up for the income you missed. This can help you make the right choice about the best time to claim your benefits.