More than 20% more social security checks

Social Security offers limited options for revising benefit decisions, but there is a lesser-known strategy that can increase benefits by as much as 24% for those who may have applied too early.

Normally, when Recipients of social benefits By applying for their benefits first, they lock in a base amount, and those who delay claiming retirement benefits until age 70 receive payments that are about 76% higher than what they would have received had they applied for benefits at the earliest eligibility age of 62. After applying, beneficiaries essentially have a fixed income that is only increased by the annual Cost of Living Adjustment (COLA) which is applied uniformly to all beneficiaries.

However, there is an exception that allows people who applied early to Social security benefits upon reaching full retirement agewhich ranges from age 66 to 67, depending on date of birth. The suspension of benefits allows recipients to earn delayed pension credits for each month of suspension until age 70. This results in an annual benefit increase of 8%, so benefits can increase by 24% over three years.

Is this a common social security strategy?

The number of people using this strategy remains uncertain. A spokesman for the Social Security Administration (SSA) stated that the agency lacks data on how many beneficiaries use this approach. Leanna Devinney, a certified financial planner at Fidelity, notes that her clients rarely reach full retirement age and then apply the “File and Suspend” strategy.

It’s important to note that Congress has tightened the rules on another “file-and-suspend” tactic that was commonly used by retirees. In 2015, it closed a loophole in the law that previously allowed a spouse to file for spousal benefits while both continued to accrue retirement credits.

The do-over strategy discussed here differs from social insurance The “apply and withdraw” option allows individuals to stop receiving benefits within the first year of applying and repay any amounts received in order to reapply for higher benefits later. This option is also not widely used because you must repay any benefits you receive and this is a financial burden that many cannot handle, but it is more well known and considered more often.

Suspend Social security benefits by age 70 won’t bring any bigger checks than simply delaying the first claim until age 70. However, this approach can be beneficial for individuals who gain a clearer understanding of their retirement cash flow, Devinney said. Some people may file early because they feel financial uncertainty, but later find that they have sufficient income from other sources to cover their expenses. Others may receive an inheritance or find a part-time job that reduces their dependence on Social Security.

Over time, retirees also develop a better sense of their life expectancy, and the longer a person lives in good health, the more likely they are to continue to be healthy. Current research shows that the life expectancy of an American man at birth is 73 years, but that figure includes early deaths and is not as relevant for retirees. Estimates suggest that a 65-year-old nonsmoker in excellent health has a life expectancy of 88 years, while a woman in similar circumstances has a life expectancy of 90 years.

Delaying benefits not only increases monthly payments, but also maximizes the effects of compound interest, as the annual COLA will be credited towards a higher basic benefit.

The surviving spouse can also benefit from the file-and-suspend strategy because the longer the higher-earner waits to file until age 70, the higher the benefit the spouse will receive if he or she dies first. Survivor benefits allow a surviving spouse to receive 100% of the deceased spouse’s pension as soon as the survivor full retirement agecompared to Spouse benefits during the lifetime of both spouses, limited to 50% of the benefits of the higher earner full retirement age.

Although claiming benefits at age 70 results in the highest monthly payments, it is not an all-or-nothing decision. Each month after the age of 62 that benefits are delayed increases future benefits, whether through a full delay or a suspension after an early claim.