This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Delay Social Security, Increase Your Benefits

NEW BERLIN, Ill. ( TheStreet) -- It's usually best, for most things in the financial world, to act now rather than wait around. The notable exception is in applying for Social Security benefits. We've discussed it before, but it is an important point that needs more emphasis. As you'll see from the table below, if you were born after 1943 (that's you, boomers!) you can increase the amount of your Social Security benefit by 8% for every year you delay getting benefits after your full retirement age.

If you are delaying your retirement beyond FRA, you'll increase the amount of benefit you are eligible to get. Depending upon your year of birth, this amount will be between 7% and 8% per year that you delay -- which can be an increase of as much as 32.5% if you delay until age 70 and were born in 1941, when your FRA is 65 years and eight months and the increase amount is 7.5% per year at that age. Look at the increase amounts per year based upon birth year:

So you can see the impact of delaying receipt of retirement benefits -- it can amount to more than 50% of the Primary Insurance Amount when you consider early benefits versus late benefits. Of course, by taking benefits later, you're forgoing receipt of some monthly benefit payments; given this, early in the game you'd be ahead in terms of total benefit received. This tends to go away as the break-even point is reached -- in your mid-70s to early 80s in most cases, which we'll review in a later article.

Here's an example of the benefit of delay in action: You were born in 1954, and as such your FRA is age 66. According to the benefit statement you've received from Social Security, you are eligible for a monthly benefit payment of $2,000 when you reach your FRA (which would be in 2020). If you delayed applying for your benefit until the next year, your monthly benefit payment would be $2,160 per month -- an increase of $1,920 per year. If you delayed until age 68 (two years after FRA), the monthly payment would be increased to $2,320, for an annual increase of $3,840. At age 69, delaying would increase your annual benefit by $5,760 and, at age 70, your monthly payment would be $2,640 for an annual benefit of $31,680 -- $7,680 more than at FRA. This amounts to a 32% increase in your benefit by delaying receipt of the benefit by four years!

It's important to note that this is not a compounding increase -- that is, your potentially increased benefit from one year is not multiplied by the increase for the following year. The factor for each year (or portion of a year) is simply added to the factor from prior years. You also don't have to wait a full year to achieve the benefit; this delay is calculated on a monthly basis, so if you delayed by six months your increase would be 4% over the FRA amount. The biggest benefit of this is that you can not only increase the amount you will get over your lifetime, but also the survivor benefit your spouse will get upon your passing. For some folks this can make a huge difference as they plan for the inevitable.

>To submit a news tip, email: tips@thestreet.com.

RELATED STORIES:







Follow TheStreet on Twitter and become a fan on Facebook.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $129.09 0.49%
FB $79.74 0.98%
GOOG $571.00 2.30%
TSLA $197.32 -2.96%
YHOO $44.10 -0.41%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs