Many retired workers depend on Social Security benefits to cover their living expenses. However, the average monthly benefit of $1,900 may not be enough for everyone. Luckily, there are ways to increase your Social Security benefits. In this article, we’ll explain how you can boost your monthly benefits by $460 within three years and why this strategy might work for you.
Understanding Your Social Security Benefits
How Benefits Are Calculated
To make the most of your Social Security benefits, it’s important to understand how they are determined. The government calculates your benefits using your primary insurance amount (PIA), which is based on your average monthly wage over your 35 highest earning years, adjusted for inflation.
When you reach full retirement age (FRA), your PIA becomes your qualifying amount. For 2024, the FRA is between 66 and 67 years old.
The Impact of Claiming Early
If you decide to claim your Social Security benefits before reaching your FRA, you could lose about 1% per month, or nearly 6.7% annually, just for claiming 36 months earlier. This means that claiming early can significantly reduce your future monthly payments. It’s important to carefully consider when to start claiming benefits, as this decision will affect your financial future.
How to Increase Your Benefits by $460 in Three Years
Delaying Your Benefits
One effective way to increase your monthly Social Security payments is to delay claiming your benefits beyond your FRA. By waiting until you turn 70, you can earn an additional two-thirds of one percent per month, or 8% per year.
This allows employees with an FRA of 67 to boost their benefits by up to 24%. For example, if you are eligible for the average monthly benefit of $1,915 at age 67, delaying until age 70 could increase your payments by $460.
Considerations and Trade-offs
While delaying benefits can lead to higher monthly payments, it’s not always the best choice for everyone. You need to weigh the trade-offs. Delaying means you won’t receive benefits for a longer period, which might be difficult if you need the money to cover your expenses.
Additionally, if you have health issues or a shorter life expectancy, delaying may not be beneficial as you might not receive benefits for long enough to make up for the delayed payments.
Alternatives to Delaying Benefits
Delaying a Little
If delaying until age 70 is not feasible, consider delaying your benefits by just a few months or a year. Even a small delay can increase your monthly payments. For instance, waiting one more month to claim benefits can add an extra $8 to $13 to your monthly check.
Claiming at 63 Instead of 62
Another option is to claim your retirement benefits at age 63 instead of 62. This slight delay can result in higher monthly payments without the need to wait several years.
Deciding when to claim your Social Security benefits is a crucial decision that can impact your financial well-being in retirement. By understanding how benefits are calculated and considering the benefits of delaying, you can make an informed choice that suits your needs and circumstances.
Whether you choose to delay your benefits or claim them a bit later than planned, these strategies can help you maximize your Social Security income and enjoy a more comfortable retirement.
FAQs
How much can I increase my Social Security benefits by delaying them?
Delaying your benefits until age 70 can increase your monthly payments by up to 24%.
What is the primary insurance amount (PIA)?
PIA is the amount of your average monthly wage over your highest 35 earning years, adjusted for inflation, which determines your Social Security benefits.
How does claiming benefits early affect my payments?
Claiming benefits before reaching full retirement age can reduce your monthly payments by about 1% per month or nearly 6.7% annually.
What are the new earnings limits for early retirees in 2024?
In 2024, early retirees can earn up to $22,320 before any benefits are withheld. For those reaching full retirement age, the limit is $59,520.
Is delaying benefits always the best option?
Delaying benefits is not always the best choice, especially if you have health issues or need the money sooner. Consider your personal situation before deciding.