When you delay filing for your Social Security benefits past Full Retirement Age (FRA – age 66 if you were born between 1943 and 1954) you earn Delay Credits for each month that you delay. The credit amount is 2/3% per month, or a total of 8% for every 12 months of delay.
When you file for benefits after delaying, these credits are applied to your PIA. The timing of the application of your credits is not immediate, though. Delay credits are added to your benefit only at the beginning of a new year, so this can cause a bit of confusion as you begin receiving benefits.
Example
For example, Janice was born on October 14, 1949, so she will turn age 66 on October 14, 2015. Janice’s PIA is $1,000. If you’ll remember from this post (When is Your Social Security Birthday), Social Security considers Janice to have reached FRA on October 1, 2015. Janice intends to delay filing for her Social Security benefits until her 68th birthday in order to accrue 16% increase to her benefits.
So upon reaching her 68th birthday, Janice contacts SSA and files for her benefit to begin in October, 2017. Beginning in October, Janice will receive a benefit that is equal to her PIA plus 10%, a total of $1,100 per month. She will receive this benefit for October, November, and December of that year.
Then beginning in January, Janice will receive an increase up to the full amount of delay credits, 16%, for a total benefit of $1,160 per month. Janice will continue to receive this benefit for the remainder of her life, unless at some point in the future she becomes eligible for a Spousal or Survivor Benefit that is greater than her own benefit.
Exceptions
There are two exceptions to the way that delay credits are applied: upon reaching age 70 or at your death. If you start your benefits at age 70, no matter what month of the year it is your full delay credits are applied to your benefit on the first month. Likewise, upon your death all delay credits are applied to your survivor’s available benefit no matter what month the survivor begins to receive the benefit.
Sterling Raskie, MSFS, CFP®, ChFC®
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.
I turned 69 in Dec 2015. If I file now and elect to take the 6 month retro pay, at which rate is my monthly ss going to be.
Your benefit would be based on six months before your filing date.
It sounds like you lose out if your birthdate is closer to the beginning part of the year. Is this true? If a person turns FRA in February and decides to delay for 2 years, they wouldn’t receive the full DRC’s (2/3% x 24 months) for delaying until January of the following year?
Age 70 is the one exception for delay credits – when you reach age 70 your benefit level is increased to the maximum on that date. For other ages, you’re right, there’s a delay before you get the credits.
jb
Jim-You state in your book that SS employees might not be familiar with file and suspend, so I want to make sure I have my ducks in a row when I go to the SSA office. I just filed after my FRA and am waiting for the application to be accepted. Once it is accepted, can I immediately go to my SS office to suspend or do I need to wait for the benefit payments to actually start? I assume I can’t do this online.
You should have suspended immediately upon filing – and to the best of my knowledge you can do this in one step online. Not sure if you can now suspend online, but you should be able to do this in the SSA office or over the phone.
jb
Jim – thanks for this “timely” information. I have two questions… you mentioned that the timing of the application of delayed credits are added to your benefit only at the beginning of a new year. Is that the case for both “file and suspend” and initial filing without suspend? I ask because a social security rep said that the once a year credit to your account at the new year only occurs if you “filed and suspended”, but if you are entitled to delayed retirement credits at initial application without suspending, between ages 66 and 70, all credits would be availble without waiting until the beginning of the year.
My second question is can a person who filed for benefits before FRA elect to suspend their benefit upon reaching FRA and would they also receive the delayed retirement credits after suspending?
Thanks! matt
Matt –
Regarding the first question, my understanding is that regardless of whether you filed and suspended, when you file for benefits that include DRC then you only get the credit up to the beginning of the calendar year that you’ve filed. Then at the beginning of the following year you’ll get the additional credits earned up to your filing date. If SSA gives the credit upon filing, so much the better, but their own operations manual says otherwise.
And with regard to your second question – yes, suspend doesn’t have to take place at the same time as file. As long as you have reached FRA, you can suspend your benefits (no matter when you filed) and accrue the delay credits. It complicates the amount you’ll actually receive since you’ll have both a reduction and an increase, but nonetheless it can be done.
jb
Thanks and I just ordered your book “A Social Security Owner’s Manual”. Your insight is greatly appreciated!
Thanks!
Jim – I read your book but I’m still sort of confused. If I retire at 55 but wait until full retirement age of 67 to take benefits, will the projections I see on the SSA.gov quick calculator probably be overstated because of the 12 year early retirement period with no earned income? I’m wondering is SSA.gov’s quick calculator assumes whatever earned income I plug into their website will continue until age 67.
Chris –
That’s exactly correct. The quick calculator and your statement make the assumption that you will continue earning at your present rate until you “retire” – meaning, start drawing SS benefits. SSA has another calculator that allows you to show zero income into the future in order to get a better idea of the actual benefit under your circumstances. If you go to this page you’ll find it under the heading “Detailed Calculator”.
jb