Increasing the size of your Social Security can help set you up for a better retirement. Many people worry about running out of money later in life, but Social Security is guaranteed to last as long as you do. A bigger benefit means you'll have less of a chance of struggling in the later part of your retirement, even if your investment account balance isn't as big as it used to be.
The good news is that it is absolutely possible to increase the amount that Social Security pays you in your senior years. In fact, you can get a 24% benefits boost if you want one. Here's how.
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You can increase your Social Security benefits by 24% if you do this
First things first: It's important to understand what your standard Social Security benefit is. Your standard benefit is the amount of income you would receive if you claimed your first retirement check at your Full Retirement Age. FRA varies by birth year but is 67 for anyone born in 1960 or later, 66 and 10 months for those born in 1959, and 66 and 8 months if you were born in 1958. The standard benefit you receive if you start payments at your designated FRA is based on a percentage of your income during your 35 highest-earning years.
Now, you can make this standard benefit much bigger, growing it by as much as 24% (if your FRA is 67). You can do that by delaying the start of your checks. Social Security aims to provide seniors with financial flexibility by allowing them to claim benefits any time between ages 62 and 70. The catch is that early filers have their standard benefit reduced because they're getting more payments over time, and late filers have their benefits increased because they are forgoing years of income and getting fewer monthly payments in their lifetime.
If you wait until the age of 70, you're rewarded for delaying by receiving a big increase to your standard benefit. For each month you delay beyond FRA, you earn a delayed retirement credit equal to 2/3 of 1% of your benefit amount. These credits can be earned until 70. When you do the math, that adds up to an 8% annual increase in your payment. So, if you wait from 67 to 70 and earn three years of delayed retirement credits, you will find yourself with a Social Security check that's 24% higher than what your standard benefit would have been worth had you claimed it at FRA.
How can you earn this benefits increase?
It's pretty easy to understand how to get your 24% benefits increase to your Social Security payment. Just wait to file for benefits until you've hit the age of 70.
However, in practice, this can actually be pretty hard to do. After all, most people don't want to work until 70 or can't do so as a result of health issues or lack of opportunities. If you don't want to keep working and collecting a paycheck until 70 but you also don't want to start Social Security until you've maxed out your benefits with the 24% increase earned at 70, you need to figure out some way to support yourself without a job or retirement benefits -- likely for several years.
Having plenty of supplementary savings in a 401(k) or other tax-advantaged retirement plan is the best solution here. You can live off your savings as you wait for your Social Security benefits to max out. Once they do and you claim them at 70, you'll have a lot more money to cover the essentials or to leave to your spouse in the form of survivor benefits if you pass away first.
It's well worth the effort to leave yourself and your loved ones with the peace of mind of knowing that your benefit checks will be as big as they could possibly be so you'll have more guaranteed funds coming for the rest of your life.
