Uncle Sam has a message for Americans approaching retirement age: If you wait as long as possible to claim Social Security benefits, you’ll get rewarded with a bigger monthly payment. This is in the interest of the U.S. government because it can hold off paying your benefits — an important consideration in light of the Social Security Administration’s financial troubles. But it’s also in your interest in that you could wind up with a lot more money.
Many retirees will end up with an extra $100,000 or more during retirement by waiting until age 67 to claim Social Security benefits instead of claiming them at age 62, according to a study from Fidelity.
The study found that if you claim Social Security at age 62 rather than waiting until your full retirement age (FRA), you can expect a 30% average reduction in monthly benefits. For every year you delay claiming benefits past your FRA up to age 70, you get an 8% increase in your benefit. If you have the financial wherewithal to hold off filing for benefits, doing so is almost always the better choice.
Americans can claim retirement benefits as early as age 62. The current FRA is 66 years old for anyone born between 1956 and 1959 (though they will have to wait a certain number of months after turning 66). For everyone born in 1960 or later, the FRA is 67 years old. Anyone born before 1956 has already reached full retirement age, according to the SSA.
Deciding when to claim Social Security retirement benefits is a personal decision based on factors such as your financial needs, health and expected lifespan. Waiting until full retirement age is not always the best strategy, especially if you have health issues that could shorten your life, or if you have an immediate need to pay down debt.
But for most seniors, waiting is the best option because you will get a higher monthly benefit for what could be 20 years or more. As Fidelity pointed out, you will also get a bigger boost from annual cost-of-living adjustments (COLAs). When your monthly payment is bigger, your COLA-adjusted benefit will be bigger as well.
Fidelity ran the numbers on a hypothetical situation involving a person with typical career earnings who turned 62 in 2022. If the person waits until age 67 to collect Social Security, they will receive about $2,000 a month. However, if they begin taking benefits at age 62, they will only receive $1,400 a month.
If the person starts collecting at age 67 and lives until age 90, they will have received about $600,000 in Social Security benefits during the course of their retirement, spread over 23 years. If they started collecting at age 62, their total payout over 28 years would be about $470,400 — a difference of nearly $130,000.
You can get an even bigger boost by waiting until 70 to collect. That’s the age at which you no longer benefit from waiting longer to collect. As previously reported by GOBankingRates, a separate analysis conducted by researchers at the Federal Reserve, Boston University and Opendoor Technologies found that waiting until age 70 to claim Social Security would boost recipients’ lifetime discretionary spending by a median $182,370 in today’s dollars.
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