Delaying Social Security benefits: How the strategy works and the maximum you can receive
Delaying Social Security benefits can provide retirees with a substantially larger monthly payment, but the strategy depends on being able to cover living expenses while waiting to claim.
Benefits generally increase by about 8 percent for every year a person delays claiming beyond full retirement age, up to age 70.
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Serving Those Who Serve describes the tradeoff clearly: “Delaying Social Security past full retirement age (FRA) increases your benefit through delayed retirement credits – generally about 8% per year up to age 70.”
The challenge is funding the years before those larger payments begin.
How delaying Social Security benefits works
CNBC reports that waiting can also increase the value retirees receive from future cost of living adjustments.
“You need to protect yourself against living a long life, and you don’t want to have regret,” financial planner James Mahaney said. “Social Security is your best tool to get there.”
Someone eligible for $3,000 per month at full retirement age could receive an estimated $3,960 at 70 before COLAs, according to the example cited by CNBC.
Once historical COLAs were included in Mahaney’s example, that age 70 benefit increased to $5,091, compared with $3,205 at full retirement age and $2,250 at 62.
“Having a built-in cost-of-living protection is one of the central things that makes Social Security unique,” financial planner Joe Elsasser said.
His advice for people worried about waiting is straightforward: “Don’t act out of fear. Model it.”
How much can delaying increase your benefits?
The strategy can produce a significant difference over retirement.
CNBC’s example found that waiting from 62 until 70 produced an approximate 76 percent total increase, with larger future COLAs because those adjustments are applied to a higher benefit.
But delaying isn’t automatically the right decision for everyone.
Serving Those Who Serve warns that people must first determine whether pensions, savings or other income can comfortably cover the gap years.
“If covering that gap means pulling too much from your portfolio or stretching your cash flow, it may not be worth it.”
The strategy can be particularly valuable for married couples because delaying the higher earner’s benefit may also increase what a surviving spouse eventually receives.
And the decision doesn’t have to be made eight years in advance.
“It’s not an irrevocable decision at 62 to delay to 70,” Mahaney said. “Maybe look at it each year.”