As many Americans know, you can retire and start collecting Social Security benefits anytime from age 62 to 70. Most people start collecting right away at age 62.
But what many people don’t know is that you can raise your benefit substantially with one of the following three options:
1. Wait until you are older to claim your benefit.
If you wait, you can raise your monthly benefit by more than 75 percent. For example, if you’d get $1,000 a month in Social Security at age 62, you’d get at least $1,333 at age 66, and $1,760 at age 70.
At age 62, you get your minimum. At 66, you get one third more and at age 70, three quarters more.
Remember, retiring and claiming are not the same thing. If you have enough retirement savings, you can delay claiming your Social Security by using a portion of your savings to live on. This will draw down your savings, but increase the inflation-proof Social Security benefit you’ll get each month for the rest of your life.
2. Work longer before claiming.
This can be especially helpful for women who have been out of the workforce – perhaps for child-rearing. If staying at your job longer raises the average of the highest 35 years of earning on which you’ve paid Social Security payroll, your benefit is increased in two ways.
The Center for Financial Literacy at Boston College gives this example: Say you were 62 in 2005 and had 31 years of employment at $40,000 a year.
If you retire and start to collect benefits at 62:
- The average of your highest 35 years of earnings is $35,400.
- Your monthly Social Security benefit is $1,030.
If you work four more years, at $40,000 a year, and retire at 66:
- The average of your highest 35 years of earnings is $40,000.
- Your monthly Social Security benefit is $1,500.
This is 33 percent more for claiming at a later age, plus 12 percent more for higher earnings, which equals 45 percent more overall.
3. Consider your options if you are married.
There are special rules for married couples that raise the benefits of the lower-earning spouse – most often the wife. When a social security recipient dies, the spouse will get either her own benefit or her spouse’s – whichever is higher.
On average, most wives will outlive their husband by about 7 years, as most wives are younger and live longer. Therefore, claiming later to receive the higher benefit is a very effective way a husband can improve his wife’s long-term financial security.
The best way to get the most out of the survivor benefit is to have the high earner delay benefits until age 70.
Consider this example from Robert Powell of Market Watch:
“Jack applies for Social Security at 62 and dies after receiving one check. His wife Jill’s survivor benefit will be based on Jack’s age-62 benefit. However, if instead he dies without having applied for Social Security, her survivor benefit would be based on his age-66 benefit, which would be about 25 percent higher.”
In summary, although it is very tempting to start collecting your Social Security benefit as soon as you are eligible, there are substantial rewards for waiting. And working longer adds even more benefit. To increase your inflation-proof retirement income by up to 75 percent, just say yes to working longer.
Tammy Kraig is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a fee. She specializes in working with couples to help them identify and work toward investment and retirement goals, long-term or short. Contact Tammy for help on virtually any financial need.
Related articles:
- 8 Money-Saving Tips for College Students
- I Need a Forklift to Carry My Keys… But I’m Saving Money
- Best Time to Buy Guide
- Get out of Credit Card Debt in 3 Years or Less
- Home Loans 101: What You Need to Qualify for a Mortgage Today
