Doing what you can to maximize your Social Security income is a smart strategy if you’re at all concerned that you might run out of money in retirement. After all, if you qualify for it, the program is guaranteed to continue paying you a benefit as long as you live.
There are a number of ways to boost the size of your monthly payouts, but one of the most straightforward is to earn delayed retirement credits, which you’ll receive if you file for your benefits later than your government-designated full retirement age.
What are delayed retirement credits?
You can earn delayed retirement credits if you’ve accrued enough work credits to become eligible for Social Security benefits at your full retirement age (FRA), but wait to claim them. For each month you delay filing after you reach your FRA, and up to age 70, your monthly benefits will rise by 2/3 of 1%.
Your FRA depends on your birth year, and for anyone who hasn’t retired already, under current law, it will fall somewhere between 66 and 67.
|If You Were Born In…||Then Your FRA Is…||… And You Can Earn Delayed Retirement Credits Starting at…|
|1943-1954||66||66 and 1 month|
|1955||66 and 2 months||66 and 3 months|
|1956||66 and 4 months||66 and 5 months|
|1957||66 and 6 months||66 and 7 months|
|1958||66 and 8 months||66 and 9 months|
|1959||66 and 10 months||66 and 11 months|
|1960 or later||67||67 and 1 month|
How do delayed retirement credits affect your monthly benefits checks?
To gauge the full impact of delaying the point at which you file for Social Security, you need to understand how benefits are calculated. If you retire at your FRA, you’ll receive your primary insurance amount (PIA), which is calculated as follows:
- SSA adds up your inflation-adjusted annual wages from your 35 highest-earning years. If you worked for fewer than 35 years, some $0s will be part of your average.
- Only wages up to the Social Security wage base limit — in 2019, it’s $132,900 — count toward this calculation. Income above that threshold doesn’t increase your benefits. On the other hand, the payroll tax that funds the program is not levied on income above that level, either.
- That 35-year sum is divided by 420 to calculate your Average Indexed Monthly Earnings (AIME).
- Your primary insurance amount is calculated by adding 90% of AIME up to a set income threshold + 32% of AIME between a first and second income threshold + 15% of AIME above the second income threshold. Each threshold is called a bend point and these points change annually, although you always receive benefits equal to the same percentage of AIME. Your PIA is determined based on the year you turn 62 and first become eligible for benefits.
Read More: What Are Delayed Retirement Credits?