Will My Rate Be Higher If I Start Drawing In January?

Apr 26 2017 - 8:15am

My full retirement age is 66 and that was on Oct 30, 2016 but I was planning on starting Social Security on Oct 30, 2017 when I turn 67.

When I turned 66 and if I had started taking Social Security, my benefit amount would have been $1668 but when I checked on Jan 1, 2017, the benefit amount showed that I would have received $1707.

I remember reading somewhere (but now cannot find that article) that by waiting until January 1 before starting to take benefits, it would result in a higher payment and wanted to know if that is the case as far as you know.

Would that mean that if I did start taking benefits when I turn 67 on Oct 30, 2017, I would get approx $1843, but instead I waited until Jan 2018 the amount would increase to approx $1885?

Thanks.

Ron

Hi Ron,

Delayed retirement credits (DRC) are accrued for each month that you defer drawing retirement benefits between full retirement age and age 70. DRCs accrue at a rate of 2/3rds of 1% per month or 8% per year, so if you wait until age 70 to start drawing benefits your rate will be 32% higher than if you had started drawing at age 66.

If a person starts drawing retirement benefits between ages 66 and 70, DRCs are initially credited only through December of the year prior to their month of entitlement. So, if you file effective with October 2017, your initial benefit rate will only include DRCs for the months October through December 2016. Your additional DRCs for January through September of 2017 would then be added effective with your payment for January 2018, although the actual recalculation may not get done until long after that.

If you apply for benefits effective with January 2018 instead, your initial rate will include credit for all of your DRCs through December 2017, which would negate the need for a subsequent recomputation. The maximization software available on this website handles all types of calculations involving DRCs, so you may want to run it before deciding when to file for benefits.

Best, Jerry