Retirees often rely heavily on Social Security benefits to support their lifestyle. While annual cost-of-living adjustments (COLA) help combat inflation, they’re not always enough to meet growing financial needs. However, there’s a lesser-known strategy that can significantly increase monthly benefits—by up to $450—without waiting for COLA increases. This approach hinges on how and when retirees claim their benefits, particularly through the “delayed retirement” method.
$450 Social Security Increase – One Non-COLA Method for Retirees to Secure Additional Funds
While COLA adjustments help keep Social Security payments aligned with inflation, the delayed retirement strategy offers a powerful way to increase your monthly benefits without relying on these periodic increases. By waiting until age 70 to claim Social Security, retirees can significantly boost their income, potentially by as much as $450 per month. However, this strategy is not for everyone. The decision to delay should be based on factors like your health, life expectancy, and financial situation. For those who can afford it, delaying benefits can lead to a much higher lifetime payout and provide greater financial security in the later years of retirement.
| Feature | Details |
|---|---|
| Non-COLA Benefit Increase | Retirees can boost benefits by delaying their claim beyond Full Retirement Age (FRA) up to age 70. |
| Potential Benefit Increase | An increase of approximately $450 per month if benefits are delayed until age 70. |
| Average Social Security Check | The average retiree receives $1,919 monthly, but delaying can increase this significantly. |
| Eligibility | Available to those who haven’t yet claimed or can suspend benefits before age 70. |
| Official SSA Resource | Social Security Administration |
What is the Non-COLA Increase?
When you first become eligible for Social Security benefits, you’re given the option to claim your benefits early at age 62, wait until your full retirement age (FRA), or delay your claim until age 70. Most people are familiar with the idea that claiming early reduces monthly payments. But what many retirees don’t know is that delaying benefits beyond their FRA can significantly increase the monthly amount—by as much as 8% per year. This delay strategy can result in a boost of approximately $450 per month for those who wait until age 70.
For example, someone whose full retirement age is 67 and who has a monthly benefit of $1,919 at that age can see their benefit grow to $2,380 per month by waiting until 70. That’s an increase of $461 per month, thanks to the delayed retirement credits.
How Delaying Works: A Step-by-Step Guide
- Understand Your Full Retirement Age (FRA): Your FRA is typically between 66 and 67, depending on the year you were born. If you claim benefits before this age, you’ll receive reduced checks.
- Choose to Delay Past FRA: Every month you delay claiming benefits past your FRA, you gain additional credits. These credits can increase your monthly benefit by two-thirds of 1% per month, adding up to a full 8% per year.
- Maximum Age for Benefits: The delayed credits stop accruing when you reach age 70, so it’s best to claim by that age to maximize the increase.
- Suspending Benefits: If you’ve already claimed benefits but are below 70, you can still suspend your benefits at FRA. This will stop the payments temporarily and allow delayed retirement credits to accrue until you restart your benefits, ideally at age 70.
- Consider Life Expectancy: While this strategy increases monthly checks, you should consider your health and financial needs. If you’re healthy and expect to live longer, delaying benefits might result in a much higher lifetime payout. However, for those in poor health or with pressing financial needs, it may make sense to claim earlier.
Real-Life Example
Let’s take a hypothetical example to see how this works in practice:
- Susan, age 67, is eligible for a monthly benefit of $1,919. She decides to suspend her benefits until age 70.
- By delaying, her checks will grow by 8% per year, so when she starts claiming again at age 70, her benefit rises to $2,380 monthly.
- Over 15 years (from age 70 to 85), she will collect $428,400, compared to the $414,504 she would have collected had she not suspended benefits.
This strategy resulted in $13,896 more over those 15 years, despite Susan foregoing payments between the ages of 67 and 70.
Who Should Consider Delaying?
Delaying benefits is not suitable for everyone. Here’s a look at who might benefit:
- Those with Other Income Sources: If you have other retirement income like a pension or savings, you might be able to afford to delay Social Security benefits to maximize future payments.
- Healthy Individuals: Retirees in good health with a family history of longevity may want to consider this strategy, as the longer you live, the more you benefit from delayed credits.
- Spousal Benefits: In cases where one spouse has significantly higher earnings, delaying the higher earner’s benefit can result in a larger benefit for the surviving spouse after the earner’s death.
Frequently Asked Questions (FAQs)
Q1: Can I undo my decision if I claim benefits early?
If you claimed benefits early and are under FRA, you can suspend payments once you reach FRA to accrue delayed credits. However, if you’ve already claimed for more than a year, you cannot go back and undo the decision entirely.
Q2: What happens if I don’t live long enough to benefit from the delay?
If you have a shorter life expectancy, it might make sense to claim benefits earlier. However, for those who expect to live past their mid-80s, delaying benefits often results in higher lifetime earnings.
Q3: Is delaying always the best choice?
No, it depends on individual circumstances like health, financial needs, and available income. Retirees should carefully evaluate their options with a financial advisor before making a decision.
Q4: Does delaying affect spousal benefits?
Yes, delaying can increase the surviving spouse’s benefit since spousal benefits are based on the higher earner’s benefit amount.
