Social Security is an important source of income for many older Americans; therefore, making prudent decisions regarding the receipt of benefits could be the key to achieving financial security.
Receiving more money from Social Security could have a significant impact on the quality of life of retirees who are concerned about having enough money to support themselves. The good news is that your decisions could have a significant impact on your annual income.
In fact, the average retiree could receive over $10,000 per year in additional Social Security benefits if they make the right decisions in their later years.
Here’s how the average retiree could receive an additional $10,740 in Social Security benefits each year.
How then could the average senior receive more than $10,000 annually in additional Social Security income? It’s basic. You would have to wait until age 70 before receiving your first check.
You have the option to begin receiving benefits at age 62, and your full retirement age (FRA) is between 66 and four months and 67. If you receive your first payment at your FRA, you will receive the standard benefit, which is a percentage of the average amount you earned during the 35 years in which your (inflation-adjusted) wages were the highest. You also have the option to wait until age 70 to begin receiving benefits.
If you begin receiving benefits at age 62 or before, your standard benefit will be reduced due to early filing penalties. If you begin receiving benefits after FRA, your standard benefit will increase because you can earn delayed retirement credits until age 70.
If you begin receiving payments within 36 months of your FRA, your benefits will be reduced by one-ninth of one percent per month. This represents a 6.7 percent annual decline. If you begin receiving checks even earlier, your monthly payment will be reduced by an additional one-twelfth of one percent. This amounts to a 5 percent annual reduction in benefits. And delayed retirement credits increase payments by two-thirds of one percent per month, resulting in a yearly increase of eight percent to your standard benefit.
If you were on track to receive the average Social Security benefit, which is $1,657 in 2022, and you claimed your benefits five years early at age 62, your benefit would be reduced by 30 percent. At age 62, you would have a monthly income of $1,160. But if you waited until age 70 and received a 24 percent increase in benefits, your income would increase to $2,055 if you did so.
A quick calculation reveals that’s an additional $895 per month, or $10,740 per year. By waiting an additional eight years, one’s income increases dramatically. Obviously, it is up to you to decide whether you would prefer to receive less money each year but sooner or whether you would prefer to maximize retirement income. However, for many seniors, waiting is the best option due to the substantial additional funds that a delayed claim offers.