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Q&A: How to raise your Social Security benefit: Delay claiming

If you’re nearing retirement age you’re probably wondering what you can do to increase your Social Security benefit.  

Most boomers are aware of the rules that provide for a reduced benefit if they apply at 62 and a higher benefit if they file at 70. The amounts are shown right on the annual Social Security statement. The difference between the age-62 amount and the age-70 amount doesn’t seem very large at first glance, especially when the carrot of immediate free money is dangling in your face.

But if you project those benefits out over a lifetime (until age 90), incorporating annual COLAs, and even additional earnings — understanding that if the primary breadwinner in your family dies, his higher benefit will continue as long as the surviving spouse is alive — the difference between applying at 62 and applying at 70 expands enormously.

A Look at the Numbers

Primary Insurance Amount

Let’s take the case of the maximum earner who is 62 years old. The PIA formula shows his PIA to be about $2,800. There are three scenarios to look at:

  1. If he were to take his benefit when he is 62, he would receive about 74 percent of $2,800, or $2,072 per month. 
  2. If he waits until full retirement age (66 and two months) he’ll receive the full $2,800. 
  3. If he delays to age 70, the benefit will increase by 8 percent annual delayed credits between full retirement age and 70, giving him a benefit of about 131 percent of $2,800, or $3,668.

If you add up all of the monthly benefits, by age 90, the difference can be shocking:

  1. If he files at 62 he will have received a total of $696,192.
  2. If he files at 70 he will have received at total of $880,320.

Even if he doesn’t make it to 90, his surviving spouse will continue to receive his benefit as her survivor benefit. These amounts do not include COLAs or any additional earnings.

If We Consider COLAs

If you add in COLAs, and assume an increase of 2.6 percent per year:

  1. If he claims at age 62, by age 90 he will have received $1,056,819 with a monthly benefit at age 90 of $4,251.
  2. If he claims at age 70, by age 90 he will have received $1,870,855 with a monthly benefit at age 90 of $7,526.

Again, even if he is long gone by then, his widow will be receiving the age-90 benefit.

If We Add in Additional Earnings

For this calculation, we’ll want to be a little more precise, and use an estimate of $2,888, which assumes our boomer earned the Social Security maximum his whole career and stopped working at age 62. 

  1. If he stops work at age 62 his PIA will be $2,888.
  2. If he keeps working at maximum salary until age 66, his PIA goes up to $2,917. 
  3. If he keeps working until age 70, it rises to $2,970. 

These estimates assume the Social Security wage base rises by 4 percent per year.

What if We Delay Claiming?

When we factor in conservative estimated 2 percent cost-of-living adjustments and 8 percent annual Delayed Retirement Credits:

  1. If he stops working at 62 and delays benefits until 70, his cumulative benefits by age 90 will reach $1,381,950 with a monthly income of $6,637.
  2. If he keeps working until 70 and delays claiming benefits until age 70,  his cumulative benefits by age 90 will reach $1,478,003 with a monthly income of $7,098.

The Recommendation

So, if you are a 62-year-old maximum earner and you want to get the absolute maximum Social Security benefit, you might:

  1. Keep working at maximum salary to age 70.
  2. Claim your Social Security benefit at age 70. 

At 70, your monthly benefit would be $4,777 compared with a benefit of $2,544 (what your monthly benefit at 70 would be if you retired and claimed benefits at 62).

By age 90, this maximization strategy will give you cumulative benefits of $1,478,003 vs. $1,008,288 if you claim at 62, and a monthly income of $7,098 vs. $3,771.

That is an astronomical difference in monthly income at age 90 that may be worth considering if you are able.

Mark Singer, CFPⓇ, lives in Swampscott and has been in the financial industry for over three decades. If you have any questions contact him at 781.599.2660 or mark@55retire.com. This content was developed in conjunction with Elaine Floyd, CFP®.

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