A Gallup poll conducted in January found that 45% of respondents were satisfied with the Social Security and Medicare systems, and a matching 45% were dissatisfied. It’s easy to guess why someone might be satisfied, as Social Security provides around 30% of retirement income to the elderly.
Why might someone be dissatisfied? Perhaps because they need or want more from the program. The average monthly retirement benefit, after all, was $1,837 as of June — about $22,000 on an annual basis. Fortunately, there’s a key way to maximize your future Social Security benefits, though only 10% of folks plan to do so.
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Timing matters
If you’re married and you both collect that average Social Security benefit of $22,000 per year, you’re still only collecting $44,000. Consider that the median household income in America was around $71,000 as of 2021. So how can you increase your future Social Security benefits? A powerful way to do so is to delay starting to collect them.
Everyone has a “full retirement age” at which they can start collecting the full Social Security benefits to which they’re entitled, based on the Social Security Administration’s record of their earnings over time. For most workers today, that age is 67.
You can actually start collecting your benefits as early as age 62, though. If you do, your benefit checks will be smaller — but you’ll collect many more of them. Delaying beyond your full retirement age will beef up your benefit checks by about 8% for each year until age 70. Check out the table below, to see the effect of turning on the spigot earlier versus later.
|
Start Collecting at: |
Full retirement age of 66 |
Full retirement age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Source: Social Security Administration.
By waiting until age 70 to claim your benefits, you can make them 24% bigger. So that average $1,837 check could become a $2,279 one, delivering around $27,000 on an annual basis. If you’re expecting a monthly benefit of, say, $2,800, a 24% bump would get it to $3,472 — bumping it from $33,600 to $41,600.
Only 10% plan to delay until age 70
According to a recent report from the investment management firm Schroders, though, only 10% of pre-retirees plan to wait until age 70 to start collecting Social Security checks. That’s a discouraging figure, but it’s easy to understand, too. After all, many people end up retiring earlier than they’d planned, perhaps due to a job loss or a health setback. Many retirees and near-retirees simply need whatever income they can get, as soon as they can get it. And anyone who isn’t in good health and/or has a decent chance of living a shorter-than-average life might get the most from Social Security by starting to collect benefits early. (Indeed, those who live average-length lives will collect roughly the same total income over their retirement no matter when they start collecting benefits.)
Here are the reasons offered in the Schroder survey why 90% of people plan to claim their benefits before age 70:
- 44% said they were concerned Social Security may run out of money/stop making payments
- 36% said they will need the money
- 34% said it was their money and they wanted access to it as soon as possible
- 13% said they were advised to take it earlier than age 70
Some of those reasons are better than others. Yes, it’s their money, but if they can wait, they may collect more of their money over time. Yes, the Social Security program is facing challenges, but it’s not going to completely run out of money any time soon, and Congress has the power to bolster and even strengthen the program.
What should you do?
If you can and if it makes sense for you, consider aiming to delay claiming your benefits until age 70. Consider your whole retirement plan, too, and fit your Social Security timing plan into it — and if you’re married, have a coordinated plan for when you’ll start Social Security. In order to delay to age 70, you might need to be creative, such as drawing from other financial accounts for a few years until your benefits start rolling in.
Remember that Social Security income is very much like an annuity you might buy: The income it delivers is pretty much guaranteed, which gives it an edge over many other income sources. (Yes, there’s a chance benefits might shrink if Congress doesn’t shore up the program, but there is and will be a lot of pressure from constituents to do so.) It also features automatic cost-of-living adjustments, or COLAs, which can make a big difference — since after 25 or 30 years of retirement, dollars will likely only have around half the buying power they do today.
Social Security income will be vital to most of us in retirement, so learn enough about it in order to make savvy decisions regarding it. Think hard about being in the 10% delaying claiming benefits until age 70.
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If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $21,756 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
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5 Comments
Here is a way to come out ahead by taking SS at age 62.
Average death age in USA is 79.11 years in 2022.
lets take $1800 at 67
According to 30% less benefit at age 62, $1,260 and average death at age 79.11 = 205 months = $258,300
Full Benefit at age 67, $1800 and average death at age 79.11 = 145 months = $261,000
That’s a -$2,700 behind for the 62 claimers,
If it was saved starting at age 62 $1,260 per month with a modest 6 percent return rate and let it accrue with amortization it would grow to $87,978.25 by age 67 and start spending the $1,260 payments at age 67 to age 79.11 that’s $1,260 x 145 months = $181,440 and let the $87,978.25 still in the investment account continue to grow it would reach $177,029.52 with amortization of 6 percent a very nice emergency fund.
the total received would top out at, remaining payments $181,440 + $177,029 investment = $358,469.52 by age 79.11
That,s a +$97,469.52 ahead of the 67 claimers.
If you drew down the investment by $560 per month starting at age 67 to match the $1,800 that the age 67 claimers receive you would still have $32,641.89 left in the investment account by age 79.11 that the 67 claimers would not have. Also you would be age 95 before you exhausted the money in the investment account continuing to boost your payments up to $1,800 if you continue living past the average death age of 79.11
There is a concept called Net Present Value that you can use on a spread sheet. The concept takes money earned today, and that earned next year, by comparing them by dividing by an adjustment for interest that would be earned/paid by delaying. The idea is that you either can save the money, or have to pay interest on it.
When I retired, I looked at this, and had my calculation verified by a CPA. The two outcomes for me (65 vs 70) compared about the same if I earned 2.7% on my money. Any higher interest rate, and it was better for me to retire at 65. Since at that time I had been making over 5% for the last 10 years on my 401(k), and I would have had to either borrow money or take it out of my IRA, taking Social Security at 65 was the right idea.
Comparing retiring 67/70 and 68/70 with the percentages above, I found that at 67 vs 70, at about 1.5% you’d get even, and in the 68/70 case at about 4% you’d earn about the same. Any more interest, and it is to your advantage at average life expectancy or less to take SS at 65.
My last post had a few errors, here is the correct version with supporting links.
Here is a way to come out ahead by taking SS at age 62.
Average death age in USA is 79.11 years in 2022. https://www.macrotrends.net/countries/USA/united-states/life-expectancy, this was the highest I could find, the CDC’s website says age 76.4 https://www.cdc.gov/nchs/fastats/life-expectancy.htm
lets take $1800 at 67
According to 30% less benefit at age 62, $1,260 and the average death at age 79.11 = 205 months = $258,300
Full Benefit at age 67, $1800 and the average death at age 79.11 = 145 months = $261,000
That’s -$2,700 behind for the 62 claimers,
Your article https://www.nerdwallet.com/article/investing/average-stock-market-return says the average stock market return is 10 percent.
If it was saved starting at age 62 $1,260 per month with a modest 6 percent return rate and left it alone, it would grow to $87,552.09 by age 67
https://www.calculator.net/investment-calculator.html
and start spending the $1,260 payments at age 67 to age 79.11 that’s $1,260 x 145 months = $182,700 and let the $87,552.09 still in the investment account continue to grow for 12 more years to age 79.11 it would reach $176,172.01 with annual return of 6 percent a very nice emergency fund.
the total received would top out at $358,872.01 by age 79.11
That,s +$97,872.01 ahead of the 67 claimers.
If you drew down the investment by $540 per month starting at age 67 +1260 being received to match the $1,800 that the age 67 claimers receive you would still have $63,333 left in the investment account by age 79.11 that the 67 claimers would not have. https://www.360financialliteracy.org/Calculators/Savings-Distribution-Calculator
Also you would be age 93 before you exhausted the money in the investment account continuing to boost your payments up to $1,800 if you continue living past the average death age of 79.11 to 93 a full 14 years after the average USA death rate the highest I could find.
My ss is way less and the raises a joke when things go up daily where it wasn’t supposed to go up more than 7% a year. When believers in Jesus go to heaven before or during rapture no more sickness, no more suffering, housing for all , food not toxic like now, water , babies aborted whole and perfect in new bodies and are children no babies in heaven and no one is older than the age Jesus died 33 in a half years old old become young automatically know everyone when you want to go somewhere no cars or planes think it you’re there. Watch you tube heaven and hell final destination till new earth new heaven new jerusalem Jewish people also run as Jesus is Jewish.
Count the years beyond 62 that you wait to collect. Multiply them by the # of years you waited to begin collecting times the amount you collected at 62. Divide by the increased amount at your collection date.
Make your decision when you see your age by the time you make up the difference. Not complicated !