If you want to increase your Social Security retirement income by 25% or more, there is a simple way to make that happen. You can wait to apply for benefits and your delayed retirement credits will then accumulate. What happens after this? The result is highly in your favor. Your benefits will permanently increase from five to eight percent annually.
When you delay the start of your benefits, Social Security research shows it works well for both singles and married couples specifically in environments with a low-interest rate. Married individuals, on the other hand, this permanent increase can serve as the survivor benefit payable for as long as either you or your spouse should live. As you can see, for a long-lived spouse who had lesser earnings than you, this can serve as a powerful form of life insurance.
Your full retirement age (FRA) is the basis of the amount of Social Security you receive which also varies depending on the year you were born. You will get less if you claimed it before you reach your full retirement age. Your benefits, however, do not cap out once you reach your full retirement age. What actually happens is that for each year after FRA that you delay taking benefits, a permanent increase in your benefits of 5-8% a year up until you reach age 70 will accumulate. The year you were born will be the basis of the amount of the increase.
If you use the Social Security’s online calculator, you’ll find out exactly how much of an increase you would receive. It will show how the benefits you receive will be impacted by the early or delayed retirement.
If you’re using this strategy to boost the higher earner’s benefit amount, then you’ll find it works particularly well. For couples, once both are receiving benefits and the first person passes, the amount with lower benefit drops off, and the amount with the higher benefit for the lifetime of the surviving spouse continues. The maximum amount of survivor benefit is ensured to be paid out when the higher earner waits until age 70 to begin benefits.
Up until 30th of April 2016, one spouse among some couples was able to file and at their full retirement age, suspend which resulted to the other spouse being allowed for a restricted application to be filed for spousal benefits at their full retirement age. If the spouse filing the restricted application had already reached FRA and whose birthday is on or before January 1, 1954, this strategy works.
The accumulation of delayed retirement credits through their own benefit and the switching to this higher amount when they reach age 70 is possible for the spouse who files and suspends. Switching to their own benefit when they reach 70 is allowable as well for the spouse who files the restricted application.
Unfortunately, there were some changes that might disappoint a lot of people who use the file and suspend strategy. In November 2015, new Social Security rules were signed into law that stated the file and suspends strategy will only be applicable for those who on or before 4/30/2016 were able to suspend benefits. Another meaning of these new rules is that anyone born on or after January 2, 1954, cannot file a restricted application. If the person is a widow or widower, he or she is an exception to the rule.
The impact of delayed retirement credits wasn't changed by the new rules. For married couples, it’s still a wise decision to coordinate in order to get the highest survivor benefit possible. What really makes this work is the delayed retirement credits. Additionally, looking for ways to protect their income well into their later years still makes sense for single individuals. If you want to accomplish this goal, delaying Social Security is one of your best bet among the most effective ways there is today.
Although there are personal aspects to figuring out when to take Social Security, you’ll also want to consider the financial implications. You will be able to make a smarter choice if you really have a good understanding of the ins and outs of delayed retirement credits. When in doubt, consulting a financial advisor might be something you want to consider as well.
