In most cases, more money requires more action, but not with Social Security, according to Motley Fool’s article, “2 Passive Ways to Boost Your Social Security Benefits.”
1. Do not FILE early. The Social Security Administration (SSA) lets you start collecting benefits at age 62. However, you won't receive the full monthly benefit you're due, until you reach your full retirement age, or FRA. Your FRA is determined based on your year of birth.
Filing early for benefits will usually mean that you’ll see a permanent reduction in benefits. You'll forfeit about 6.67% a year for the first 36 months you claim benefits ahead of FRA, and then 5% a year for each 12-month period after that. Therefore, filing for Social Security three years early will decrease your benefits by 20%. Filing four years early will mean a 25% reduction and filing five years early will mean a 30% cut. However, if you sit back and do nothing—delaying until your FRA to file—you'll get more money than you would by filing sooner. If you wait on your benefits past your FRA, you'll permanently increase them by 8% a year in the process, up to age 70.
2. Do not RETIRE early. Your Social Security benefits are calculated based on your 35 highest-paid years of wages. However, most people earn more at the end of their career than they do at the start, so if you wait to retire and keep working later in life, you might up your benefits, by replacing some lower-earning years with higher earnings.
If you began working full-time at age 22, and you're thinking of retiring at age 57, you'll still have a full 35 years of work under your belt. You won't risk having any zero income years calculated into your benefits formula. That’s what happens to those who don't have a full 35 years in the workforce. However, if you earned $25,000 a year at age 22, and you're earning $125,000 a year now, by not retiring, you'll have the chance to replace some of those $25,000 years with a higher income. (Note that in calculating your benefits, the SSA will adjust earlier earnings for inflation. Even so, a $25,000 salary earned 35 years ago still can't match a $125,000 salary).
There’s a good chance that even if you have a nice healthy nest egg, your Social Security benefits will help pay for some additional or unexpected costs. The very idea of increasing benefits by doing nothing is very appealing. Remember that by remaining in the workplace, your Social Security benefits keep growing.
Reference: Motley Fool (October 28, 2019) “2 Passive Ways to Boost Your Social Security Benefits”
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