If you’re planning to rely on Social Security for a significant share of your monthly income, it’s important to know how to make the most of it.
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Here’s the Social Security filing strategy that could increase your lifetime benefit by $300,000.
Wait as Long as Possible To Claim Your Benefits
The Social Security Administration (SSA) allows people to start claiming their benefits as early as age 62, but that’s a mistake if you want to maximize your lifetime benefit, according to Landsberg Bennett, a private wealth management company. Claiming early reduces it. It’s better to wait until full retirement age — or FRA — which is between ages 66 to 67 for most people depending on birth year, but it’s even better to wait until age 70.
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How Waiting Until Age 70 Can Add Thousands to the Bottom Line
Your Social Security benefit depends on three things: The number of years worked, the amount of money earned and the age benefits are claimed. If you claim before FRA, your benefit will be reduced — permanently. If you claim at FRA, you’ll receive your full benefit for the rest of your life. However, if you wait until age 70, you’ll receive significantly more over your lifetime.
The increase in benefits occurs through delayed retirement credits. Every year after your FRA that you choose not to claim Social Security, your benefit will increase by about 8% (for those born 1943 and later) and remain that way over your lifetime, per the SSA. However, after age 70, the benefit no longer grows, so to maximize your income, you should claim it by then.
How Much Your Benefit Would Decrease or Increase If You Claim at 62
The average monthly Social Security benefit for retired workers is approximately $2,007, according to the SSA. If you decided to claim early at 62, your benefit would be decreased by 30%, which means your monthly retirement benefit would only be $1,405 (about $600 less).
If you wait until FRA to claim, the benefit will neither be decreased or increased. But if you wait a few more years until age 70, you would receive about 24% more than your FRA benefit of $2,007, which would be $482 more per month or $2,489.
How Delaying Could Add $300,000 to Your Lifetime Benefit
If you claim at 62, you’d get $1,405 per month. At 70, you’d get $2,489, a difference of $1,084. Over 23 years, that adds up to more than a $300,000 difference.
Even if you don’t live to 93, the increase from delaying is still worth considering. Claiming at FRA would add about $482 to your monthly checks over your lifetime, and waiting just a few more years until 70 would add even more — over $1,000 per month for as long as you receive benefits.
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This article originally appeared on GOBankingRates.com: The Social Security Filing Strategy That Could Add $300,000 to Your Lifetime Benefits
