Retiring at age 70 and claiming Social Security benefits can lead to a substantially higher monthly payout compared to claiming benefits at an earlier age. The Social Security Administration (SSA) encourages delayed retirement by offering Delayed Retirement Credits (DRCs), which effectively increase your monthly benefit amount for each month you delay claiming past your full retirement age (FRA), up to age 70.
Understanding Delayed Retirement Credits
Delayed Retirement Credits are a powerful incentive for those who are able to continue working or simply defer claiming their benefits. For each year you delay claiming benefits past your FRA, your monthly benefit increases by a certain percentage. This percentage varies depending on your birth year. For anyone born in 1943 or later, the annual increase is 8%. This means that if your full retirement age is 67, and you delay claiming until age 70, you accrue three full years of delayed retirement credits, resulting in a 24% increase in your monthly benefit amount compared to claiming at your FRA.
How Delayed Retirement Credits Accrue
- Full Retirement Age (FRA): This is the age at which you are entitled to 100% of your Primary Insurance Amount (PIA). For most people today, FRA is between 66 and 67.
- Delaying Past FRA: For every month you delay claiming benefits beyond your FRA, your benefit amount increases by a fraction of the annual DRC rate. For those born in 1943 or later, the monthly increase is 2/3 of 1% (or 0.00666...).
- Maximum Delay: Delayed Retirement Credits stop accruing at age 70. There is no additional benefit to delaying past this age.
Illustrative Examples: How Much More Money Do You Get If You Retire at 70?
Let's consider an individual with a Full Retirement Age (FRA) of 67, and a Primary Insurance Amount (PIA) of \$2,000 per month at FRA. This PIA represents the benefit they would receive if they claimed at age 67.
| Retirement Age | Benefit Adjustment | Monthly Benefit | Annual Benefit | Total % Increase from FRA |
|---|---|---|---|---|
| 62 (Earliest) | -30% | \$1,400 | \$16,800 | -30% |
| 65 | -13.3% | \$1,734 | \$20,808 | -13.3% |
| 67 (FRA) | 0% | \$2,000 | \$24,000 | 0% |
| 70 (Latest) | +24% | \$2,480 | \$29,760 | +24% |
- Comparison to FRA (Age 67): If this individual waits until age 70, their monthly benefit jumps from \$2,000 to \$2,480, representing an annual increase of \$5,760. This is a 24% increase.
- Comparison to Early Claim (Age 62): The difference is even more dramatic when compared to claiming at the earliest possible age of 62. Claiming at 62 would result in a monthly benefit of \$1,400 (a 30% reduction). Therefore, delaying until 70 would provide an extra \$1,080 per month, or \$12,960 per year, compared to claiming at 62. This represents a total increase of over 75% ((\$2,480 - \$1,400) / \$1,400).
Factors to Consider When Deciding to Delay
While the financial benefits of delaying are clear, the decision to claim Social Security at 70 is personal and depends on several factors:
- Health and Longevity: If you are in good health and have a family history of longevity, delaying benefits can significantly pay off over your lifespan. However, if your health is poor, claiming earlier might be more advantageous.
- Current Income Needs: If you need the income to cover essential living expenses, delaying might not be feasible. Assess your current financial situation and other sources of retirement income.
- Other Retirement Savings: If you have substantial savings in 401(k)s, IRAs, or other investment accounts, you might be able to draw from those funds during the delay period, allowing your Social Security benefits to grow.
- Spousal Benefits: If you are married, consider how your decision affects your spouse, especially if they are younger or have lower earnings. A higher benefit for you could mean a higher survivor benefit for them.
- Inflation: Social Security benefits are adjusted for inflation (Cost-of-Living Adjustments, or COLAs), so delaying helps ensure your higher starting benefit is also adjusted upwards over time.
Strategies for Financing the Delay
If you decide to delay claiming Social Security benefits until age 70, you'll need a strategy to cover your expenses in the interim. Here are some common approaches:
- Continue Working: If your health and employment opportunities allow, continuing to work even part-time can provide the necessary income and allow your Social Security benefits to grow.
- Draw Down Retirement Savings: Utilize funds from tax-deferred accounts like 401(k)s or IRAs, or taxable investment accounts, to bridge the gap until age 70. This can be particularly beneficial if these accounts are well-diversified and have seen good returns.
- Use Other Assets: Consider using other assets, such as savings accounts, CDs, or even selling a non-essential asset, to provide income.
By carefully planning how to finance the delay, you can position yourself to take full advantage of the significantly increased benefits available by waiting until age 70.
Conclusion
For many retirees, delaying Social Security until age 70 presents a powerful opportunity to secure a higher guaranteed income stream for the rest of their lives. The 8% annual increase for each year past your Full Retirement Age (up to age 70) can result in a substantially higher monthly benefit, potentially increasing your total lifetime income. While personal circumstances like health, current financial needs, and other retirement assets play a crucial role in this decision, understanding precisely how much more money you get if you retire at 70 is a critical step in optimizing your retirement strategy. Consider consulting with a financial advisor to tailor this decision to your unique situation and maximize your retirement security. For further details on calculating your specific benefits, you can refer to the official Social Security Administration website.
