Benefits of Waiting Past Full Retirement Age to Receive Social Security Retirement

What are the benefits of waiting past full retirement age to start taking Social Security Retirement Income?
Kevin Wenke

Kevin Wenke

CFP | CLU | Investing | Insurances | Taxes

What are the benefits of waiting past full retirement age to start taking Social Security retirement income?

The year you were born determines when you are considered to reach full retirement age for Social Security purposes.  At full retirement age you are eligible for 100% of your primary insurance benefit.

Normal Retirement Age

A fully insured worker is eligible to receive social security retirement benefits as early as age 62 at a reduced rate but every year they wait (up to age 70) their benefit increases.  That benefit continues to increase at an accelerated rate past full retirement age.  Let’s look at how this works.

Every year you wait past full retirement age your benefit increases 8% per year.  For those who have a normal retirement age of 66, waiting to 70 can provide a 32% increase over your primary insurance amount and for those born after January 1st 1960 where full retirement age is 67, waiting to 70 can increase your primary insurance amount 24%.

graph retirement income Decision Tree Financial

This works out to a 2/3rd of a percent increase each month waited past full retirement age that a worker waits to start receiving their social security benefits.

While this may sound great but there are a few things you need to consider before deciding to wait.  One variable is spousal benefits. If your spouse is eligible for benefits based on your earning record, then delaying your benefits delays their benefits as well.

However, when the higher wage earner delays taking benefits the survivor benefit also does up should they die before their spouse.  Survivor benefit options become available regardless of whether the surviving spouse is receiving their OWN social security benefits or ½ of the spouse who passed.

Another consideration as to when the increased benefit from waiting will pay you back for the benefits you didn’t receive earlier is the breakeven point.

The decision to taking social security early or waiting until later is an important one. Consider how that decision interacts with all parts of your financial goals to ensure you make the best choice

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