Americans who are eligible for Social Security retirement benefits can begin receiving their retirement benefits at any time between the ages of 62 and 70. However, they have a full retirement age for Social Security purposes and for people born in 1960 or later, that age is 67.
If you choose Social Security before If you reach full retirement age, your benefit will be permanently reduced. Conversely, if you choose to wait, your advantage will gradually increase.
Under current legislation, Social Security pension benefits increase by 8% annually beyond full retirement age until age 70 could be beneficial permanent increased by 24%. But like most retirement issues, there’s more to it than that.
The increase could actually wait more than 24%
It’s also worth noting that your dollar benefit could increase by well over 24% thanks to any cost of living adjustments or COLAs that occur along the way. The Social Security Administration (SSA) adjusts benefits each year to keep up with inflation. So if you defer Social Security three years past your full retirement age, you’ll see three years’ worth of COLAs in your monthly checks. Sure, the increase will still be 24% adjusted for inflation, but the dollar amount could be significantly higher.
There’s another reason why your edge could even increase by more than 24% if you wait. Delaying Social Security and continuing to work could also help increase your benefit once you finally start collecting. The SSA takes your 35 best-earning years into account when determining your starting retirement benefit. So if you’re in a higher-income phase of your career, it can have the added effect of increasing your median income.
Other ways to increase your Social Security benefits
Unfortunately, there aren’t any big “tricks” to increasing your Social Security benefits — at least not since Congress closed some big loopholes a few years ago.
When it comes to increasing your Social Security pension, there are essentially only three ways to do it:
- Wait longer to claim your benefit that we have discussed here.
- Increase your income.
- Work 35 years if you haven’t already.
The Social Security benefit formula takes into account your 35 years of highest earnings, adjusted for inflation. If you have not worked 35 years, zeros are used for the missing years to calculate your average. And if you’ve worked 35 years but earned extremely little some of those years, it might be beneficial to work an extra year or two to replace the lower-income years. For example, a year on my Social Security bill consists of about $1,400 of part-time income during my freshman year, and that’s certainly dragging my average down for now.
It can also help temporarily supplement your income, although this is often easier said than done. You could take on a side hustle since the gig economy has never been this robust, or otherwise boost your earnings. But beyond that, there are no secrets to increasing your Social Security benefit.
Is waiting until 70 right for you?
To be perfectly clear, it may not be practical or necessary for you to wait as long as possible to start collecting Social Security. Perhaps you were retired earlier than desired for health reasons and need the income which unfortunately is a very common problem. Or maybe you have millions of dollars in assets and savings for retirement, and waiting to draw them in won’t make a meaningful difference in your quality of life after retirement.
On the other hand, you may have a long family life history and be in good health and financial condition to wait until 70.
In any case, it’s important to realize that Social Security is designed so that the average American receives roughly the same amount of retirement income throughout his or her life, regardless of when the claim is made. Before you decide to defer Social Security until age 70 to get an extra 24%, consider this Everyone about the pros and cons of doing so.