Delaying Social Security Income: What’s It Worth?

by Jeff C. Johnson

Social Security card and money

If you are eligible for Social Security retirement income (SSI) benefits, you have some choices to make. If you’re hazy on this subject, read on; it could be worth a few hundred thousand dollars in additional lifetime income.

For the purposes of this “introduction” to the SSI claiming decision, understand that this is an overview, not a full and complete explanation. This is not specific or individual advice on when to take Social Security and any decisions should be made only after additional consideration and analysis, which should also include your own individual circumstances. My strong recommendation is that it be based on advice from a qualified, fiduciary financial professional with access to sophisticated tools that can analyze multiple scenarios.

Your Full Retirement Age (FRA) is the age at which you generally can collect “full” retirement income benefits. It is based on your year of birth. See the following table.

Your earnings record determines your full Social Security payment (more on that another day) and is called your Primary Insurance Amount (PIA). You should be getting updated statements regarding this amount from the Social Security Administration.

If you claim SSI benefits at your FRA, you will receive 100 percent of your PIA. If you delay one month, you will receive 100 ⅔ percent of your PIA. If you delay a year, you will receive 108 percent of your PIA. If you were born in 1954 or prior, your FRA is 66. Delaying for 48 months until 70 to claim your benefit means you receive 32 percent of your regular full retirement amount for life!

Below is a chart showing FRAs based on birth year, the number of months you could potentially delay credit before 70, and the maximum delayed credits that you could earn based on the year you arrived on the planet. FRA data is from the Social Security Administration, and the calculations are mine.

Birth Year Full Retirement Age Months to 70 Years Potential Increase
1949–54 66 48 32%
1955 66 + 2 months 46 30 ⅔%
1956 66 + 4 months 44 29 ⅓%
1957 66 + 6 months 42 28%
1958 66 + 8 months 40 26 ⅔%
1959 66 + 10 months 38 25 ⅓%
1960 and After 67 36 24%

Reviewing the potential increase column, you can see that current retirees have an advantage over SSI participants born in 1960 and later.

Before making a claiming decision, your considerations should include the amount of the increase if you delay, your potential life expectancy and that of your spouse (your surviving spouse can trade up to your SSI, including delayed credits), and your financial circumstances.

Please note: If you are ill or anticipate a shorter life expectancy, claiming benefits earlier may be a better choice for you (depending on your spouse’s situation).

Do not make this claiming decision alone. Speak with a trained, fiduciary financial professional with access to powerful tools who can analyze multiple scenarios for you.