Q&A: Delaying Social Security benefits

Dear Liz: I’d like to get something straightened out. Between things that you and other columnists have said, we laymen have been told that if we wait until we’re 70 to start taking Social Security, we’ll get 8% more for each year we delay, and a total of 40% more than if we start taking it at our retirement age.

But the retirement age is 66, not 65. So there’s a four-year difference, which would produce an increase of only 32%. Even if the yearly increase is exponential (compounded), the total increase after four years would be 36%. So where does that 40% figure come from?

Answer: It didn’t come from this column, so it probably came from someone who was writing when 65 was the full retirement age.

As you note, the full retirement age is now 66 and will move up to 67 for people born in 1960 and later.

Delayed Social Security benefits max out at age 70, so there are fewer years in which a benefit can earn a guaranteed 8% annual return for each year it’s put off. Delayed retirement credits aren’t compounded, but the return is still better than you could get guaranteed anywhere else.

That doesn’t mean delaying Social Security past full retirement age is always the right choice. Social Security claiming strategies are complex, with a lot of moving parts, particularly if you’re married.

Before filing your application, you should use at least one of the free calculators (AARP has a good one on its site) and consider using a paid version, such as MaximizeMySocialSecurity.com, if you want to tweak some of the assumptions or if you have a particularly complicated situation.

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