The size of your Social Security check isn't set in stone once you claim benefits. There are several things that could change how much you receive each month.
Still, the age at which you claim your Social Security retirement benefits can have a huge impact on your finances in retirement. Those claiming early typically receive a smaller benefit than those who wait. All else being equal, the difference between claiming at age 62 and waiting until age 70 to claim benefits can be as much as a 77% boost to your benefits.
But even if you've already claimed benefits, it might not be too late to boost your monthly check. There's a strategy that can help boost the amount you receive from the government by as much as 26.7%.
Image source: Getty Images.
The three factors impacting your Social Security benefit
Before we dive into the details of how to boost your benefit, it's important to review the basics of how the government calculates your monthly check. There are only three factors that go into determining how much you'll receive in Social Security:
- How much you earned during your career.
- When you were born.
- The age at which you claim benefits.
The first step in calculating your Social Security benefit is determining your average indexed monthly earnings (AIME). That might sound complicated, but the idea is straightforward. The Social Security Administration (SSA) looks at your earnings history and adjusts every year's earnings for changes in wage inflation. It then takes the 35 highest-earning years and finds the average for each of those years. Then it divides by 12 to get your average monthly earnings.
The SSA takes that number and plugs it into the Social Security benefits formula , which determines your primary insurance amount (PIA). The PIA is the amount you'd receive if you claim benefits in the month you reach full retirement age. That's where the year you were born comes into play. Those born in 1954 or earlier reached full retirement age at 66. But the age increases by two months for each year you were born after 1954 until it reaches age 67 for those born in 1960 or later.
Finally, the SSA will adjust your benefit based on the age you claim. If you claim benefits before your full retirement age, you'll only receive a portion of your PIA. If you wait to claim beyond your full retirement age, you'll accrue delayed retirement credits. Those credits boost your Social Security benefit by 2/3 of a percentage point of your PIA for each month you delay beyond your full retirement age up until age 70. The table below shows exactly how your claiming age impacts your benefit relative to your PIA.
| Year Born | Age 62 | Age 63 | Age 64 | Age 65 | Age 66 | Age 67 | Age 68 | Age 69 | Age 70 or Later |
|---|
| 1943 to 1954 | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% | 132% |
| 1955 | 74.2% | 79.2% | 85.6% | 92.2% | 98.9% | 106.7% | 114.7% | 122.7% | 130.7% |
| 1956 | 73.3% | 78.3% | 84.4% | 91.1% | 97.8% | 105.3% | 113.3% | 121.3% | 129.3% |
| 1957 | 72.5% | 77.5% | 83.3% | 90% | 96.7% | 104% | 112% | 120% | 128% |
| 1958 | 71.7% | 76.7% | 82.2% | 88.9% | 95.6% | 102.7% | 110.7% | 118.7% | 126.7% |
| 1959 | 70.8% | 75.8% | 81.1% | 87.8% | 94.4% | 101.3% | 109.3% | 117.3% | 125.3% |
| 1960 or later | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
Data source: Social Security. Calculations by author via SSA.gov .
As you can see, delaying your Social Security application until 70 can boost your benefits by 24% to 32%, depending on when you were born. But there's still a way to earn those valuable delayed retirement credits even if you claimed early.
The little-known Social Security rule that can boost your benefit
As mentioned, there are a lot of different ways your Social Security benefit could change even after you claim. One of the ways you can take back control of the amount you receive is by asking the SSA to suspend your benefits. When you suspend your benefits, you'll temporarily stop receiving your monthly check. In the meantime, however, the SSA will start adding delayed retirement credits (based on your previous benefit) for each month you wait.
You can elect to suspend your benefits at any point once you reach full retirement age. The suspension begins the month after the SSA approves your application. Your benefits automatically resume at age 70 if you haven't started them again already.
So, someone born in 1958 will reach full retirement age this year or next year at age 66 and 8 months. If they suspend their benefit upon reaching full retirement age, they'll be able to boost their benefit by 26.7%. Those past full retirement age or with later full retirement ages will still be able to boost their benefit, but by a more limited amount.
Image source: Getty Images.
There are some important caveats to consider. Anyone collecting benefits on your earnings record (except a divorced spouse) will no longer be eligible to continue doing so. For example, a spouse collecting spousal benefits will revert to their personal benefit.
Additionally, if you're on Medicare, you need to pay for Part B premiums. The SSA typically deducts those premiums from your monthly check, but you'll have to pay out of pocket while you're not collecting benefits. Be sure to include that in your budget when deciding to suspend benefits.
Going a few years without Social Security may be a great option for some. Those in good health with solid finances will likely boost their lifetime income from Social Security.
The Motley Fool has a disclosure policy .
Most Popular
Comments / 0