Social Security

How Much Will My Social Security Benefits Increase if I Delay Taking Them?

Social Security Benefits increase 5-8% a year. On average, the increase to your benefits outpaces the stock market. That is why it is a good idea to delay starting social security if you can.

Social Security’s goal is to provide the same amount of benefits over your lifetime no matter when you choose to start receiving them. So, if you receive benefits early, the monthly payments are lower to make up for the fact that you will receive benefits for a longer time. If you delay benefits, they are increased to make up for the fact that you will receive them for a shorter period of time.

Since life expectancies keep getting longer, the increases from delayed benefits have become more valuable. As a result, Social Security’s formula to keep benefits the same doesn’t work as well anymore. For most people, it pays to delay benefits as much as possible.

The exact change in your benefits depends on when you were born and which benefit you are taking (primary, spousal, or survivor). Here is how Social Security determines the exact amount.

Full Retirement Age

When Social Security was created, there was only one age to start social security benefits: 65. As the program was expanded to let people take benefits earlier or later, 65 became knows as the "Full Retirement Age." This was the age at which a person may first become entitled to full or unreduced benefits. In 1983, Congress enacted a gradual rise in the Full Retirement Age to help the long-term finances of Social Security.

Today, your Full Retirement Age depends on when you were born:

Year of Birth1 Full Retirement Age
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943 - 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

Early Benefit Reductions

In 1956, Social Security offered the option to take benefits early to women only. In 1961, they expanded the offering to include men. By taking benefits early, a retiree would collect more benefit payments over their lifetime. Social Security created "early benefit reductions" to keep the amount paid to a retiree over the course of their lifetime the same.

The formula for early benefit reductions is different for each of the three types of retirement benefit - primary, spousal, and survivor.

Primary Benefits

Primary benefits can be taken as early as 62. Benefits are reduced for each month between when you start your benefits and your full retirement age. For the first 36 months, they are reduced by 5/9 of 1% per month. After that, they are reduced by 5/12 of 1% for each additional month.

For example, let’s look at someone with a Full Retirement Age of 66 who starts taking their benefits at 62. They have started their benefits 48 months early. For the first 36 months early, their benefits are reduced 5/9 * 36 = 20%. For the additional 12 months, their benefits are reduced another 5/12 * 12 = 5%. So their total benefit reduction will be 25%.

Spousal Benefits

Like primary benefits, spousal benefits can be taken as early as 62. Benefits are reduced for each month between when you start your benefits and your full retirement age. For the first 36 months, they are reduced by 25/36 of 1% per month. After that, they are reduced by 5/12 of 1% for each additional month.

For example, let’s look at someone with a Full Retirement Age of 66 who starts taking their spousal benefits at 62. They have started their benefits 48 months early. For the first 36 months early, their benefits are reduced 25/36 * 36 = 25%. For the additional 12 months, their benefits are reduced another 5/12 * 12 = 5%. So their total benefit reduction will be 30%.

Survivor Benefits

Survivor benefits can be taken as early as 60. For some people, survivor benefits use a slightly different Full Retirement Age (see table below). Regardless of your Full Retirement Age, survivor benefits taken at 60 are always reduced 28.5%. Benefits started between 60 and Full Retirement Age are reduced each month proportionally.

For example, let’s look at someone with a Survivor Full Retirement Age of 66 who starts taking their survivor benefits at 62. They are taking their benefits 48 months early. The earliest they could take survivor benefits is 60, or 72 months before their Survivor Full Retirement Age. Their survivor benefits will be reduced 48 / 72 * 28.5% = 19%.

Survivor benefits are also affected by the reductions or increases in the deceased spouse’s benefits. If the deceased spouse took their primary benefit early, that reduction would be applied in addition to the survivor benefit reduction.2 If the deceased spouse earned delayed retirement credits, they would also be applied in addition to the survivor benefit reduction.

For example, lets look at a hypothetical couple - Jack and Jill. Jack took his primary benefit one year early. His benefit was reduced 6.7%. Jack subsequently passed away and Jill decided to start her survivor benefit when she reached 60. Here survivor benefit is reduced by 28.5%. The actual benefit she will receive is Jack’s benefit, minus his benefit reduction, minus her survivor benefit reduction : (1 - 6.7%) * (1 - 28.5%) = 66.7%, or a 33.3% total reduction to Jack’s original benefit.

Survivor Full Retirement Age:

Year of Birth Full Retirement Age
1939 or earlier 65
1940 65 and 2 months
1941 65 and 4 months
1942 65 and 6 months
1943 65 and 8 months
1944 65 and 10 months
1945 - 1956 66
1957 66 and 2 months
1958 66 and 4 months
1959 66 and 6 months
1960 66 and 8 months
1961 66 and 10 months
1962 and later 67

Survivor benefit reductions are calculated differently from the others. The earliest age Like primary benefits, spousal benefits are reduced for each month between when you start your benefits and your full retirement age. For the first 36 months, they are reduced by 25/36 of 1% per month. After that, they are reduced by 5/12 of 1% for each additional month.

For example, let’s look at someone with a Full Retirement Age of 66 who starts taking their spousal benefits at 62. They have started their benefits 48 months early. For the first 36 months early, their benefits are reduced 25/36 * 36 = 25%. For the additional 12 months, their benefits are reduced another 5/12 * 12 = 5%. So their total benefit reduction will be 30%.

Delayed Retirement Credits

In 1972, Social Security offered the option to delay taking benefits. By taking benefits later, a retiree would receive fewer but larger benefit payments over their lifetime. Social Security called the monthly benefit increase "Delayed Retirement Credits." The purpose of delayed retirement credits is to keep the amount paid to a retiree over the course of their lifetime the same. Due to lengthening life expectancies, delaying social security often increases the amount a retiree will receive over their lifetime.

Delayed retirement credits are available only for primary benefits. Spousal and survivor benefits do not accrue delayed retirement credits.

Delayed retirement credits can be earned until 70. After that, there is no benefit to delaying social security. Benefits are increased ⅔ of 1% for each month between when you start your benefits and your full retirement age.3

For example, let’s look at someone with a Full Retirement Age of 66 who delays taking taking their benefits until 70. They have delayed their benefits by 48 months. Their benefits are increased 2/3 * 48 = 32%.

  1. If you were born on January 1st you should refer to the previous year. (If you were born on the 1st of the month, Social Security figures your benefit (and your full retirement age) as if your birthday was in the previous month.)
  2. This is not always the case. If the deceased spouse and the survivor started benefits as early as possible, the total reduction in benefits could be as high as 50%. To prevent that from happening, Social Security created a very complicated formula: Max((survivor's benefit reduction * deceased's benefit reduction * deceased’s benefit amount), Deceased's benefit amount * Min (survivor's benefit reduction, 0.825))
  3. If you were born before 1943, the monthly increase is different.

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