What are Delayed Retirement Credits

Remember when we discussed your full retirement age (FRA)? Well, your FRA is going to be somewhere between 65 and 67 years old, depending on when you were born. For anyone born after 1960, it will be 67 years old. But did you know that you don't have to file for Social Security at your full retirement age? You can elect to delay filing until you are 70 years old. Why would anyone do this? You might ask. The reason is that you will receive what are called delayed retirement credits for every month you delay filing for Social Security after your full retirement age.

So if your full retirement age is 67, that gives you 36 months of potential delayed retirement credits. Each month gives you about a 0.67% increase in your Social Security benefit, or 8% each year. In this case, a total of 24% would be possible.

An example of this would be if your primary insurance amount (PIA) is $1000, and you waited until you are 70 years old, and your FRA was 67. Your monthly benefit would now be $1240 for the rest of your life. Not too shabby.

A few things to keep in mind: 

Delayed retirement credits do not impact your spousal benefit. 

If your PIA is $1000, your spouse is entitled to up to 50% of that, or $500, if they do not have their own benefit. If you were to wait until 70 and collect the extra $240, your spouse's benefit would still be $500. It does not increase past your primary insurance amount.

The delayed retirement credits are included in calculating a surviving spouse's benefit. 

When one spouse passes, the surviving spouse is entitled to a spousal benefit if that spouse had a higher benefit. In the case of delayed retirement credits, and using the example we used previously, the additional $240 would be part of your spouse's survivor benefit. In other words, they would receive $1240 instead of the original PIA of $1000.