If you wait until after your full retirement age to begin taking retirement benefits, the benefit is permanently increased.
You can choose to start receiving social security retirement benefits any month after the month you reach age 62. If you start receiving benefits before your full retirement age, the benefit will be reduced, as explained here. If you start receiving benefits the month after reaching full retirement age, you’ll receive the full benefit. Yet you can receive an increased benefit by delaying the start to a later month, up to the month after you reach age 70. After that, there is no further increase for delaying the start of your social security benefit.
At one time, there was very little economic incentive to delay the start of your benefit beyond full retirement age. The increase in the benefit wasn’t enough to make up for the fact that you receive fewer payments: you had to live past age 98 just to break even! (In those days the earnings test applied even after full retirement age, so people would consider delaying their benefits if they wanted to continue working after age 65.) Congress has changed the formula so that the break-even point comes much sooner, and some people might reasonably choose to delay starting their retirement benefits based on their life expectancy.
The amount of increase you get for delaying the start of your benefit now depends on the year you reach age 62. Don’t let that confuse you: the year you turn 62 determines what percentage applies, but you have to forgo benefits for one or more months after reaching full retirement age (which is 65 or later, depending on when you were born) to qualify for the increased benefit.
| Late Retirement Increase | ||
| Age 62 in | Increase per month | Break-even |
| 1995 – 1996 | 11/24 of 1% | 218 |
| 1997 – 1998 | 1/2 of 1% | 200 |
| 1999 – 2000 | 13/24 of 1% | 185 |
| 2001 – 2002 | 7/12 of 1% | 171 |
| 2003 – 2004 | 5/8 of 1% | 160 |
| 2005 or later | 2/3 of 1% | 150 |
The break-even point is the number of months after the start of your benefit when the total of all your delayed payments will be equal to the total you would have received if you started your payments at full retirement age.
Example: You reached age 62 in 2002 and decided to delay the start of your benefits by 4 months. Your monthly benefit is increased by 2.33% (4 times 7/12 of 1%). If you live long enough to receive 171 benefit payments (a little over 14 years), you’ll have received the same total amount as if you started your payments at full retirement age. If you live beyond that age, your total benefits will be greater than if you started to receive payments at your full retirement age.
Note that the break-even point for people born after 1942 is only 12½ years after the date benefits start, which is considerably shorter than average life expectancy at full retirement age. As a result, the average person in that age group will receive a greater total benefit if he or she delays the start of benefits for a period of time after reaching full retirement age.