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If you are planning to wait until full retirement age, here is a way to get one-third more

Doing the Math is Important

Starting in 2022, there is a way to receive over one-third more than what your Social Security benefit would otherwise be by the time you retire.

As anyone knows who is nearing retirement age, it makes sense to delay receiving Social Security benefits. At age 62 you can start receiving benefits but your full retirement age (FRA) is around 67 years old.

But you can actually delay until you reach age 70. This allows you, by the Social Security Administration rules, to receive 8.0% more each year. Actually, the formula goes like this: 1% per month x 2/3rds. So over 6 months, it works out to 4.0%, and over 3 years it works out to 24% more.

So if you wait until age 70 you get 25% more. But that is not it! A recent change actually increases this.

Recent Changes

Next year (2022), retirees (whether they receive it early or not) will get a 5.9% increase. This is the largest increase in the past 40 years. The typical cost of living adjustment (COLA) is just 1.3%.

So, if you delay benefits until age 70, you now will get an average of 10% more. Here is how I calculated this: by assuming 5.9% plus 3 years of 1.3% COLA increases, the “geometric” return is +10%. (For mathematically minded people, here is the formula: (1.059 x 1.03 x 1.03 x 1.03) -1 = 10.08%.)

Therefore, you will get both the 24% cumulative “delay” increase at age 70, plus the 10% cumulative COLA estimated increase or a total of 34%. That is greater than a one-third increase just by delaying your retirement benefits.

And voila! Now you can bring in one-third more than what you would have before. Now, to be fair, mathematically, the 10% COLA increases will also accrue to anyone at FRA who decides to take benefits at that age. But the point is you can expect a 34% gain by year 70, assuming the average COLA is 1.3% each year after 2022.

What Should You Do

Don’t forget, the longer you can wait, the better off you will be. Dave Ramsey, for example, recommends this:

“Unless you absolutely need those Social Security benefits to fund your retirement, we usually recommend holding off until age 70. If you’ve been saving for retirement consistently in your 401(k) and IRA, you should be able to do just that.”

The point is to try to delay your satisfaction. You could potentially make over 34% more by then.

This is not financial advice and you should not rely on my analysis to buy or sell any stock or crypto, as I am not undertaking to induce you to buy or sell securities.

I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

This represents my analysis of retirement planning and it is not meant to provide you with specific advice in your own situation. I do not presently own any related securities, but I may buy some of these in the coming weeks.

Mark Hake writes articles on InvestorPlace.com, Medium.com, and Newsbreak.com on stocks and cryptos and also runs the Total Yield Value Guide which you can review here.

He is a top-ranked financial writer, ranked 5 stars by TipRanks.com in the top 0.30% of all financial bloggers with an average return of over 23.0% on over 500 stock and crypto articles in the past year.

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