The Little-Known Social Security Rule That Quietly Grows Your Check Over Time

Most retirees know that waiting longer to claim Social Security leads to a bigger monthly check. What many people do not realize is that a specific rule drives that increase and allows the extra money to compound over time.

The rule is called delayed retirement credits, and they are one of the most overlooked senior benefits. Because the increase compounds and lasts for life, the difference can be substantial. Learn how delayed retirement credits work, how the increases are calculated, and what the maximum increase looks like.

What are delayed retirement credits?

Delayed retirement credits are the way the Social Security Administration rewards retirees who postpone claiming benefits past full retirement age. For people born in 1960 or later, full retirement age is 67.

Once you reach full retirement age, you'll receive credits to your Social Security benefit for each month you delay. Credits increase benefits by two-thirds of 1% per month, up to age 70. For every full year, your benefits increase 8%. After age 70, you won't receive additional credits for waiting, so there is no additional benefit if you wait any longer.

What makes this such a valuable tool for retirement is that the increases are permanent, and all future cost-of-living-adjustments (COLAs) are based on the higher benefit amount.

How is the increase calculated?

One important detail many retirees overlook is that delayed retirement credits are calculated monthly, not just annually. That means your benefit grows gradually the longer you wait, and you don't need to wait a full year to reap the rewards of waiting if your circumstances change.

Here is how the calculation works:

• Social Security adds 2/3 of 1% per month after full retirement age
• This equals roughly 8% per year
• The increase continues until age 70
• Waiting from age 67 to 70 produces about a 24% increase

What does the maximum increase look like?

The maximum delayed retirement credit occurs when you wait the full three years between full retirement age and age 70.

If your full retirement age benefit is $2,200 per month, you'll receive that amount if you claim Social Security upon turning 67. Waiting one year to age 68 boosts your check to $2,376. At age 69, your income increases to $2,552 by delaying for two years. 

The maximum starting benefit increases to $2,728 if you wait until age 70 to start receiving Social Security benefits. That represents roughly a 24% permanent increase over the benefit available at full retirement age.

Because Social Security payments last for life, that difference continues every month for the rest of your retirement. Research from retirement economists frequently highlights this increase as one of the most powerful claiming decisions retirees can make.

How delaying Social Security adds up

Consider two retirees with the exact same earnings record. Retiree A claims benefits at full retirement age of 67 and receives $2,200 per month, while Retiree B waits until age 70. The retiree who waits until age 70 receives roughly $2,728 per month because of delayed retirement credits.

Waiting until age 70 gives this retiree an extra $528 per month, which is more than $6,300 per year. Over a 20-year retirement, that adds up to more than $125,000 in additional lifetime income. When you include annual cost-of-living adjustments, the difference is even greater.

This illustrates why delaying your Social Security benefits past full retirement age can have a meaningful impact on your retirement income.

Common misconceptions about this rule

While the delayed retirement credits are fairly straightforward, there are several misunderstandings that you need to know about.

First, the rule applies only to your personal retirement benefit. Spousal benefits do not increase by waiting past full retirement age. Survivor benefits also follow different rules depending on the circumstances.

Second, some retirees assume the increase disappears once cost-of-living adjustments occur. In reality, the opposite is true. Social Security COLAs are applied to your current benefit amount. This means that your higher base benefit earned from delayed retirement credits also receives those annual increases.

Over time, the COLA increases applied to your higher Social Security benefits widen the income gap between someone who claimed early and someone who waited.

When delaying benefits may not make sense

Delaying benefits is not automatically the best decision for everyone. The key factor is the breakeven point at which it makes sense to claim early, wait until full retirement age, or delay until age 70. Studies have shown that the breakeven point between claiming early and full retirement age is 78 years and 8 months, while the breakeven for waiting until age 70 is 80 years and 4 months.

Health, longevity expectations, and current income needs all play a role. Someone who needs income immediately or who expects a shorter retirement may reasonably choose to claim earlier.

Retirement planners often recommend evaluating claiming strategies alongside other retirement income sources to determine the best approach for your situation. Seniors who have other sources of income, like pensions, retirement accounts, or rental properties, can more easily afford to delay filing for Social Security benefits.

Bottom line

Delayed retirement credits can significantly boost your retirement income, yet they are one of the most commonly misunderstood features of Social Security. By waiting past full retirement age, your benefit grows roughly 8% per year until age 70. These adjustments permanently raise the monthly benefit you receive each month for the rest of your life.

Because cost-of-living adjustments apply to the larger benefit, the advantage compounds further over time. Delaying benefits is not the right choice for every retiree when planning for retirement. Yet, the rule effectively creates a rare opportunity to receive a guaranteed increase in retirement income without taking on any additional investment risk.

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Author Details

Lee Huffman

FinanceBuzz writer Lee Huffman is a former financial planner and corporate finance manager who now writes about early retirement, credit cards, travel, insurance, and other personal finance topics. He enjoys showing people how to travel more, spend less, and live better. When Lee is not getting his passport stamped around the world, he's researching methods to earn more miles and points toward his next vacation.