Why You Can’t Count on Boosting Your Social Security Benefits

There’s an easy way you can squeeze more money out of Social Security. All you need to do is figure out your full retirement age (FRA), and then delay your filing past that point.

FRA is based on your year of birth, as follows:

Year of Birth

Full Retirement Age

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 or later

67

Data source: Social Security Administration.

For each month you hold off on claiming Social Security past FRA, your benefits will grow by 2/3 of 1%. This amounts to an annual boost of 8%.

Now once you turn 70, you can no longer accrue the delayed retirement credits that cause your benefits to grow. But if your FRA is 67 and you wait until age 70 to file, you’ll boost your Social Security payments by a cool 24% — for life.

Image source: Getty Images.

Delaying your filing is a strategy you might seek to employ if you’re worried about not having a large enough retirement nest egg, or if you simply want more financial freedom once your career comes to a close. But here’s why you can’t bank on being able to hold off on filing.

When life gets in the way of your plans

It’s often the case that workers are forced to retire sooner than planned. If your company needs to downsize its staff and you’re laid off in your mid-60s, you might struggle at that point to find another job. (While it’s illegal to not hire someone on the basis of age, it’s also a known circumstance that older workers frequently have a hard time getting new jobs.) If that happens and your paycheck disappears, Social Security might need to come to your immediate rescue.

Furthermore, you might experience health issues that force you to cut back on work to the point where you need to go part-time or even retire altogether. If that happens, you might need your Social Security income right away to cover your expenses.

That’s why you really shouldn’t count on being able to boost your benefits by delaying your filing. If it ends up working out for you to do that, great. But you shouldn’t neglect your nest egg in the hopes that you’ll simply snag a higher set of benefits to compensate. If your plans to delay your filing don’t work out, you could wind up in a very serious financial spot.

Small contributions can go a long way

The idea of building a retirement nest egg may be daunting. But actually, you may be surprised at how easy it is to amass a lot of wealth in an IRA or 401(k) plan.

If you set aside $300 in your savings every month over 40 years, and your investments in your retirement plan generate an average annual 8% return (which is a bit below the stock market’s average), you’ll wind up with about $933,000 to your name. That money may be more than enough to cover your senior living costs, even in the absence of a boosted Social Security benefit.

There’s much to be gained by delaying your Social Security filing past FRA. And if you’re able to hold off on claiming benefits until age 70, you might enjoy a 24% boost or more. But don’t assume that that’s an option you’ll be able to capitalize on. Instead, make an effort to save consistently in case life ends up throwing you a curveball.

The $16,728 Social Security bonus most retirees completely overlook
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