Unlocking a Bigger Paycheck: The Surprising Benefits Of Delaying Social Security

When it comes to Social Security, timing is everything. While you can start claiming benefits as early as age 62, waiting until later could significantly boost your retirement income. For those who can afford to delay, the financial rewards can be substantial. Here’s an in-depth look at the savings and benefits you can gain by waiting to claim Social Security.

Understanding How Delaying Works

Social Security benefits are calculated based on your Full Retirement Age (FRA), which is determined by your birth year. If you claim benefits before reaching your FRA, your monthly payments will be permanently reduced. However, if you delay claiming past your FRA, your benefits grow by approximately 8% annually until age 70. This delayed retirement credit can dramatically increase your monthly checks.

For example:

  • Claiming at 62: You’ll receive up to 30% less than your FRA benefit.

  • Claiming at FRA: You’ll receive 100% of your benefit.

  • Claiming at 70: You’ll receive 24% to 32% more than your FRA benefit, depending on your exact FRA.

This incremental increase can add up to thousands of dollars over your retirement.

The Financial Impact of Waiting

Delaying Social Security can lead to significant savings and higher overall income, especially if you live a long life. Here are the key areas where you’ll see the potential benefits :

  1. Higher Monthly Payments

    1.  Each year you delay claiming, your monthly benefit grows. For someone eligible for $2,000 per month at FRA, waiting until age 70 increases the benefit to $2,480. That’s an extra $5,760 annually and more than $100,000 in additional income if you live into your mid-80s.

  2. Inflation Protection

    1. Social Security benefits are adjusted annually for inflation through Cost-of-Living Adjustments (COLAs). If you delay, these adjustments apply to a higher base benefit, ensuring your purchasing power keeps pace with rising costs.

  3. Lifetime Earnings Boost

    1. While early claimers receive smaller checks over a longer period, those who delay can often outpace them in total lifetime benefits. For instance, someone who claims at 70 could see $446,400 in total benefits by age 85, compared to $386,400 for someone who claims at 62—a $60,000 difference.

  4. Enhanced Spousal and Survivor Benefits

    1. Delaying your benefits can also boost what your spouse or surviving partner receives. Higher benefits for you mean higher spousal benefits while you’re alive and increased survivor benefits for your partner after you’re gone.

The real question you should ask… Is Delaying Social Security Right for You?

Delaying benefits isn’t the best choice for everyone. Here are some factors to consider:

  • Health and Longevity:

    • If you’re in good health and have a family history of longevity, waiting to claim could be a wise financial move. However, if you have serious health concerns, claiming earlier might make sense.

  • Financial Flexibility:

    • Can you afford to wait? If you have other income from savings, investments, or a pension, delaying Social Security could work in your favor. However, some people need the benefits of a fixed income immediately due to unique circumstances.

  • Still Working?

    • If you’re earning income and claim Social Security before your FRA, your benefits might be reduced. Delaying eliminates this issue and maximizes your benefit potential.

  • Tax Considerations:

    • Depending on your income, Social Security benefits can be taxable. Delaying may help you better manage your tax burden in retirement.

Real-Life Scenarios

Let’s consider two examples to highlight the savings potential:

  • Scenario 1: Claiming Early Mary, 62, decides to claim Social Security immediately. Her monthly benefit is $1,400, adding up to $16,800 annually. If she lives to 85, her total benefits amount to $386,400.

  • Scenario 2: Delaying Until 70 John waits until age 70 to claim his benefits. His monthly check is $2,480, or $29,760 annually. By age 85, he’ll have received $446,400—$60,000 more than Mary.

Making the Decision

Deciding when to claim Social Security is a personal choice that depends on your health, financial situation, retirement goals, and what feels right to you. While delaying isn’t feasible for everyone, the potential for higher income and greater financial security makes it worth considering. The truth is, none of us know when we will pass on, and we need to make informed, prudent decision that YOU feel confident in. This will vary from person to person, and does not always have to be perfectly aligned with the statistics and mathematics to your decision. Consulting with a financial advisor can help you determine whether delaying Social Security aligns with your retirement strategy by running many different scenarios to lay out the best options. By weighing the pros and cons, you can make an informed decision that aims to maximize your benefits and sets you up for a secure retirement.

 Interested in what Social Security selection scenarios you may have available to you? Call our offices at 518-406-5624 and we would be happy to provide insight to you. We look forward to helping you by providing honest, objective, thoughtful advice. Thank you!

Audra Higgins