Patience: It Just Might Pay Off 1

You may be wondering how you can increase your Social Security benefit, and one thing to consider is to delay receiving those benefits. 

Most boomers know they’ll get a reduced benefit if they apply at 62 and a higher benefit if they wait until 70. The difference in these amounts, which are shown on your social security statement, initially doesn’t seem very large, but you might be surprised.

If you project those benefits over a lifetime (age 90), incorporating the annual cost of living adjustments (COLA’s), the difference between applying at 62 and 70 expands enormously.

Let’s take the case of John, a maximum earner, who is 62 years old. His benefit at full retirement age (66 years and 6 months) is about $2,800 a month. Let’s look at two other scenarios:

  1. If he takes his benefit at 62, he’ll receive 72½% of $2,800, or $2,030 per month. And, this amount could further be reduced if John is still working. 
  2. But, should he delay to age 70, his monthly check will be 128% of $2,800, or $3,584.

Assuming an annual 2.6% COLA (the historical average), the cumulative difference is noteworthy.

Claiming at 62, by age 90 he will have received $936,702 with an ending monthly benefit of $3,957. Filing at 70 gets him $1,653,763, with a final monthly amount of $6,986.

That is a significant difference that should be worth considering. Plus, claiming at 70 always maximizes the spousal survivor benefit.

It’s important to recognize that, while we’ve outlined some general rules of thumb in this article, there’s no guarantee this strategy works within the context of your overall financial plan and retirement goals. For customized help, visit a financial adviser who has the calculation tools necessary to analyze your individual Social Security claiming strategy.