The Social Security Administration has a little trick up their sleeve. They don’t add your credits immediately if you file after full retirement age.
This is a little puzzling to me and I’m not sure why they do this. It’s not as if they don’t have the systems in place to do the calculations. After all, if you file early, the reductions are applied immediately!
I’m going to show you how this works but let me give you a little context around this first. I often discuss the monthly reductions for filing early or increases for filing early and understanding that is a fundamental part of today’s discussion. You can file for your retirement benefits between the ages of 62 and 70. If we imagine this red line is your full retirement age, your benefit is increased if you file after and decreased if you file before. The decreases are broken up into two separate bands. First, you have the 36 month period immediately prior to full retirement age where benefits are reduced by .556% per month and then anything more than 36 months where benefits are reduced by .417%. If you file after your full retirement age your benefit will be increased by .667% for every month. These increases are referred to as delayed retirement credits.
It’s important to understand that there is a difference in how the increases and reductions are applied. If you file at any time before your full retirement age your benefit will be calculated by these reduction amounts and immediately reduced beginning with your first check.
That is not the case for the increases. In the operations manual you can see there are two times retirement benefits are increased for delayed retirement credits. One is in the month you attain age 70 and the other is in January of the year following the year you earned the delayed retirement credits.
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Social Security Delayed Retirement Credits: The Delay in Adding to Your Benefit
Social Security plays an essential role in providing financial security for millions of Americans. It serves as a safety net for retirees, disabled individuals, and survivors, ensuring that they have a steady income to rely on. While most people are aware of the basic workings of Social Security, many might not be familiar with the concept of Delayed Retirement Credits (DRCs) and how they can impact their benefits.
In simple terms, DRCs are a form of incentive offered by the Social Security Administration to individuals who choose to delay claiming their retirement benefits beyond their full retirement age (FRA). For every year that a person delays taking their retirement benefits, their eventual benefit amount increases by a certain percentage, typically 8% per year. This increase is known as a Delayed Retirement Credit.
The concept of DRCs was introduced to encourage workers to postpone their retirement and continue working, encouraging financial stability and reducing the burden on the Social Security system. It aims to reward individuals who are willing to work longer by providing them with a higher monthly benefit when they eventually decide to retire.
To be eligible for DRCs, one must have reached their FRA, which is determined based on the year of birth. For individuals born between 1943 and 1954, the FRA is set at 66. However, for those born after 1954, the FRA gradually increases by a few months, eventually reaching 67 for those born in 1960 or later.
Once an individual reaches their FRA, they have the option to start receiving their Social Security retirement benefits. However, for each year they delay, up until the age of 70, they accumulate DRCs. For instance, if a person’s FRA is 66, and they choose to delay receiving benefits until 70, they will earn a total of 32% in DRCs (8% for every year delayed).
Utilizing DRCs can significantly impact a retiree’s monthly benefit amount. By delaying their retirement, individuals can enjoy a higher monthly check for the rest of their lives. This can be particularly beneficial for those who have other income sources or sufficient savings to sustain themselves until they claim their Social Security benefits.
It’s important to note that DRCs stop accruing after the age of 70. Therefore, there’s no point in delaying benefits beyond that age, as there are no additional incentives to be gained. Moreover, it’s crucial to make an informed decision before deciding to delay retirement. Considerations such as overall health, financial needs, and expected longevity must be taken into account to determine if delaying benefits is the right choice.
While DRCs provide an opportunity to enhance monthly benefits, it’s vital to understand the potential trade-offs. Delaying retirement means forgoing Social Security income for a certain period, potentially requiring alternative income sources during that time. Additionally, waiting to claim benefits might not necessarily be financially advantageous for everyone, as individual circumstances can differ.
To get a clear picture of how DRCs would affect their benefits, individuals can consult with a financial advisor or make use of the various tools and calculators available on the Social Security Administration’s official website. These resources can help individuals estimate their retirement benefits at different claiming ages and understand the impact of DRCs on their overall financial plan.
In conclusion, Delayed Retirement Credits present an opportunity for individuals to increase their Social Security benefits by delaying their retirement beyond their full retirement age. By understanding the rules and potential implications, individuals can make more informed decisions about when to claim their benefits. Taking advantage of DRCs can provide financial security and peace of mind during retirement, ultimately helping individuals achieve their retirement goals.
Devin, are you aware that when the non-working spouse files for spousal benefits based on her husband's work record, if he waited to file from his FRAS of 66 years until 70 years of age, and earned 8% extra for each of those four years he delayed in filing, that the spouse is not eligible to get the "delayed credits?" That means that she would get less than the 50% she would have been entitled to receive.
My FRA is September, so do I file for SS to start in December with 1st check in January? And if so, the check would reflect delayed months?
TY.
Very good breakdown. Devon is my favorite to get updated on SS.
Do I understand this correctly: If I suspend in March of year 1 and resume in March of year 2, I've earned a total of 8% in DRCs, BUT I won't see the 8% added to my benefit until January of the year 3? Meaning I 'lose' the DRC benefit increase for April-December of year 2? Assuming I won't be 70 in year 2.
If you apply at age 69 on Jan 15 do you wait until following jan for credits to start
Hi Devon good stuff, i am pondering retiring march 2023, at that time i would be 69 and 6 mo, so i would not get deleted credit until i turn 70 Sept 2023?
Devin, thanks for the info. Never knew about this delayed benefit payout by SS.
I applied at 66 years, 4 months, in May (January birthdate) and I did understand the January beginning payment for the delayed monthly benefit. However, I thought I'd receive the backpay for the 7 months of SS benefit when I applied in May. I called several times to correct this and they never gave me a satisfactory answer. YOU answered it perfectly! At the 3 minute mark.
Thank you for your help!
The lesson learned (and its too late now), apply in November-December, NOT May, as I did.
Just rewatched; reminded me to file in December
Devin, my parents filed after full retirement age over 2 years ago and SS still have not given them the proper credits. Any tips on getting them to fix this?
Government wants to break ss ,that's why they put disabled people on ss disability, and also some kids are on ss ,now there not enough money coming in ? SS is for people who payed in 35 to 40 years! ! !
I just turned 70 – TODAY – and recall this great video from April. I haven't received any communication from Social Security since March 2017. I did file and suspend back in 2015 so that my wife could take spousal benefits (she filed a restricted application for them). I called the SSA in March of this year asking what action I needed to take to ensure my benefits start at 70. I was told I need do nothing, and the agent gave me a rough estimate (based on my FRA amount) of what I could expect, starting the fourth Wednesday in July. I was told I'd be getting a letter "in June or even late May" explaining what I'd get. No letter, so far. I called yesterday and asked again. This time the agent mentioned that nothing apparently had been done on my "file" since 2017 (could almost hear him blowing the dust off of it as if it were a paper file). He said that I'd be getting the delayed retirement credits added to my first benefit payment, but NOT for the first six or seven or eight (he wasn't sure how many months in the year there are before and including June, I guess!) months of the year leading up to my June birthday. He said the DRCs would be included in the calculation, starting in January 2020, but not in the six benefits payments I'd get from July through December. He was following the first example you showed where someone files before 70 and has to wait till the following January for the DRCs to be calculated in. This is just the opposite of your second example and statement (and POMS citation, which I found, too) where you note that if someone starts taking benefits right after they turn 70, there are no delays in earning the full amount for having delayed till the age of 70. The agent could not even give me a clear and concise dollar amount of what I could expect (I got a couple of different estimates). He also gave me a different amount from what the agent in March said my FRA was. It's as if I have been talking to two different SSA organizations. Finally, he said that my first benefit payment could even arrive early in July (not the fourth Wednesday, per my birthday) and before any letter of explanation. It's as if I woke them up from a long coffee break. It is one CONFUSING MESS. Maybe the computer calculations the SSA actually uses, based on the POMS, will be accurate (not the stories I'm getting from the agents). Just thought I'd let you know… and thanks for this great video.
What of a parent dies. How do they figure survivor benefits for a child and how long do they last?
I've been working since 1975 I was born 1960 I'll be 60 years old in January I plan to work till 67 in which I would get 100% if things don't change on this new Social Security reform then 2 years and pay off my home I'm real tired I would like to retire at 65 but my wife is disabled but I have to look after her just in case something happened to me that she'll have enough money to live on I only make $21,000 a year I work at Walmart as a night stocker do you think that this new bill is going to make me work longer I hope not
Great info.
Questions 1. Who owns the account that the 2.6 trillion $ that circulates the SS money ? 2. Who get or what happens to the interest on the 2.6 trillion in circulation on the SS account ? Thanks & God
They are trying to screw people out of their hard earned money! What politicians enacted this rule?
Excellent to know! Thanks, Devin!
Thank you
so you may as well wait until December after full retirement..because you won't get any benefit mid year.
They have figured it out… LOL!
When is file if my birthday is sep 1 1953?
I'm learning things about SS that I never knew. As a matter of fact I really didn't know anything except when full retirement age was.
Good tip. Maybe in 10 years, SS will fix it. Except they won't have any more money to pay out.
Hi Devin,
I’m 63 and have a 13 year old as well as a wife at home. If I take SS benefits now, I’ll be getting a significant monthly distribution until the 13 yo turns 18.
Question is should I take it now
Or wait till I’m at Fra?
Interesting. SSA is taking advantage. I will start collecting at age 70 in a few months, so it doesn't affect me, but good to know.
I plan on waiting to file on my 70th birthday. However, I often wonder if it will be available in the next 10 years. With a 22 trillion dollar debt, it remains to be seen.
I want to retire at 62 and move abroad. I could delay taking SS, but if I am no longer working they would be averaging in $0 every year to my top 35 earning years…so at 67 I think the amount I’d receive would be just a tiny bit higher at 67. Doesn’t seem like it makes sense to delay getting my check. Am I wrong ?
My grandfather died at 54 my uncle died 52 my brother died 42 my dad at 67 so I took mine at 62 smart thing to do any ways at 70 that’s 8 years to make up i have to live age 80 telling take it ASAP
Do you offer paid, phone or video consultations?
they are just thieves the GOVERMENT
Thank you. Now I have no doubt I'll NOT file to start collecting benefits in the 'dead zone.'
Thank you.
Hey Devin I'm kind of wondering do I need to file in July when I turn 66 for the 66 and 4 months or do I need to wait till December to file or November to file for the 66 and 4 months