Waiting Until This Age To Retire Can Majorly Boost Your Social Security Benefits

As you work through your final years ahead of Social Security benefit eligibility — which you can start drawing early at 62 – you'll almost certainly start to think about ways to stretch your retirement income just a bit farther. Many investors and savers chase after expanded contribution opportunities to their personal retirement accounts. After your 50^th birthday, you're able to add an additional $1,000 to your IRA accounts every year, and company match benefits for your 401(k) can introduce considerable volumes of free money to your savings pool. Younger employees working to pay down student debt can even leverage 401(k) matching in some circumstances as they balance these divergent financial goals.

Your Social Security benefits will support a large volume of the retirement income you depend on, however. For the average worker today, it replaces roughly 40% of preretirement income, while experts suggest that most retirees will need to develop a plan to replace about 75% of that figure. This means that Social Security benefits may ultimately cover around half of your income needs in retirement, but they can be expanded to deliver even more security if you plan for it. Waiting to start your benefits will give you a bonus payout rate that can reduce the amount you need to cover personally, but choosing a time to retire and begin the flow of these funds isn't totally straightforward.

For Americans born in 1960 or any time after, full retirement age is set at 67. This makes the oldest people in that cohort 65 and just a few short years from being able to claim their full retirement benefit. Starting the flow of these checks now, a 65-year-old would be entitled to a payout figure at 86% of their full benefit. On the other hand, waiting until after you cross the threshold of full retirement age entitles you to an increase in your check amount. At 68 you'll receive 108% of the full amount, while waiting until you turn 70 provides a 24% boost to your monthly checks.

The average check amount in 2024 was $1,907. Using that figure as a baseline, if you were entitled to that figure but opt to start benefits at 70 rather than 67 you'd receive monthly payments of $2,365, a nearly $500 increase. That extra cash can make a huge difference as you navigate the financial landscape of retirement. Saving it for later, when increased health care costs might sneak into the picture, for instance, or leveraging it to enjoy your day to day lifestyle in retirement more fully can drastically improve the financial balance of your golden years.

The increase in your payment rate is only one aspect of the benefit that you stand to gain by waiting to begin taking Social Security checks. It's a major benefit, but simple math surrounding the 24% increase is missing one key element when exploring what an extra few years in the workforce can do for a retiree. Social Security benefits are calculated based on the highest 35 years of earnings on your tax record. This is a big piece of the puzzle, and one that isn't explored in a surface level examination of your prospective benefit amount.

On average, workers experience a ballooning of their salary as they age, before ultimately seeing a drop off in that figure heading into retirement. If you're someone embedded in a solid job that experiences performance bonuses and yearly cost-of-living adjustments that gradually increase your salary on an annual basis, remaining in the workforce for a few extra years can work wonders on your average earnings tally. The three years separating full retirement age from the peak benefit payment rate can fully replace the three lowest earnings figures on your long running equation, perhaps drastically increasing the average (especially if one or more of them were spent in school, for instance, and perhaps count against you as a zero). Not only will you therefore see a 24% boost, but the base payout figure will also jump, netting you a potentially tremendous increase in the benefit you receive.

Improving the amount you take home in Social Security benefits provides a number of secondary financial stabilizers. A larger check means a lower amount that you have to draw down from your savings accounts. This can reduce the speed at which you sell off assets to fund your retirement, preserving its value for much longer and supporting a robust and long lasting retirement as a direct result.

But there's also the matter of how much you are able to save in the first place. Staying in your job until you hit 70 and begin drawing benefits isn't an approach that everyone will decide on, but it can give you a few extra years to deposit funds into your retirement accounts rather than draw from them. This allows you to push back a prospective insolvency date (based on your proposed drawdown strategy) by a considerable measure. It also gives you as much as $24,000 — in today's contribution limits — more in principal value in your IRA accounts and/or $69,000 in 401(k) contribution availability. Adding even a fraction of these maximum values to your retirement funding reserves can make an enormous difference as you plan your exit from the workforce, transforming your financial picture for the better.