Reliable, lifelong income is something we all dream of for our retirement years. Social Security retirement benefits promise just that, and with cost-of-living adjustments, they retain their buying power throughout your lifetime. Since these benefits are so critical, it makes sense to aim for the maximum income you can receive from them. Luckily, there’s a simple strategy that can significantly boost your monthly payment.
Depending on your circumstances, this boost could be as much as $1,983. Here’s the game plan. To supercharge your Social Security benefit by up to $1,983 each month, there’s one main thing you need to do: delay claiming your payment until you’re 70, even though you’re first eligible at 62. The figures speak for themselves. At 62, the maximum monthly Social Security check you can receive is $2,572, but at 70, it jumps to $4,555.
Social Security payments calculation
A quick calculation shows that’s a $1,983 leap. This difference is due to the way the Social Security system balances out the lifetime income you receive, regardless of when you claim benefits. So, claiming early leads to more, smaller checks, while claiming later results in fewer, larger checks. Of course, not everyone will see their benefit increase by the full $1,983, even if they hold off until 70. The exact increase depends on your standard benefit amount.
Your standard benefit is a percentage of your average wages during your 35 highest-earning years. You can claim this standard benefit at your full retirement age (FRA). Claiming before your FRA results in early filing penalties, reducing your benefit, while delaying beyond your FRA earns you delayed retirement credits, increasing your benefit (until the age of 70).
High-income history to Social Security tax
Those with a high-income history (equal to at least the “wage base limit”, which is the maximum income subject to Social Security tax) can reach the maximum standard benefit. By delaying until 70, they can increase it to the highest possible amount — $4,555.
But even if your earnings were below the wage base limit at some points in your career, you can still give your monthly Social Security check a considerable boost.
How much can you boost your benefits? To estimate how much extra income waiting until 70 to claim benefits would provide, follow these steps:
- Determine your standard benefit amount by visiting mySocialSecurity.gov.
- Calculate your benefit amount if you claimed it at 62, applying early filing penalties to your standard benefit.
- Compute your benefit amount if you claimed it at 70, applying delayed retirement credits to your standard benefit.
- Subtract the amount calculated in step 2 from the amount in step 3 to figure out the difference in benefits between claiming at 70 versus 62.
In a nutshell, no matter your standard benefit amount, postponing claiming until 70 rather than starting at 62 can result in a substantial increase. Bear in mind, though, this does mean sacrificing eight years of income. So, you need to weigh this against your need for the largest possible monthly Social Security. But if a bigger monthly check is your ultimate goal, then delaying is the way to go.