What Are Delayed Retirement Credits?

Delaying Retirement Gets You More From Social Security

The extent of the Social Security benefits you collect in retirement depend upon the age you retire. When you start taking benefits can have a significant impact on your lifetime income.

The longer you wait—up to age 70—the more you'll receive. You might receive credit for each year you delay beyond full retirement age, depending on your age. These credits are known as "delayed retirement credits," and they vary from 3% to 8%, depending on when you were born.

Full retirement age is 66 for those born from 1943 through 1954. Two months are then added for each birth year after 1954 until age 67 for those born in 1960 or later. 

How Delayed Retirement Credits Work

The amount received by those who retire early is reduced by 5/9th of 1% for each month before full retirement age, up to 36 months. It's reduced by 5/12th of 1% for an additional 24 months after that.

Your benefits could be reduced by as much as 30% if you grab your Social Security as soon as possible, at age 62. 

Year of Birth   Credit Per Year

1917-24 3%
1925-26 3.5%
1927-28 4%
1929-30 4.5%
1931-32 5%
1933-34 5.5%
1935-36 6%
1937-38 6.5%
1939-40 7%
1941-42 7.5%
1943 and later 8%

What a Difference the Years Make

Your benefits will increase by a percentage for each year you postpone retirement after you reach full retirement age. 

Year Born     Yearly Rate of Increase  Monthly Rate of Increase

1933-1934 5.5% 11/24 of 1%
1935-1936 6% 1/2 of 1%
1937-1938 6.5% 13/24 of 1%
1939-1940 7% 7/12 of 1%
1941-1942 7.5% 5/8 of 1%
1943 or after 8% 2/3 of 1%

Individuals born on January 1 should use the prior year's rate. 

Spousal Rates

Your choice to delay retirement can also impact the benefits your surviving spouse receives. Your spouse should get your full benefit plus delayed retirement credits if you start receiving benefits after full retirement age.

Those who qualify for benefits as divorced or widowed spouses might also want to delay their own benefits, but apply for the spousal benefit in the meantime. How and when each person collects Social Security should be carefully thought out to maximize benefits.

The Social Security Administration offers an interactive online calculator that can help. 

Don't Delay Medicare

The same provisions aren't allowed with Medicare if you decide to delay retirement until age 70. Even individuals who continue to work must sign up for Medicare once they become eligible at age 65.

You can apply as early as three months before your 65th birthday, which can be a good idea because it makes your Medicare effective the month you turn 65. Otherwise, you have until three months after the end of your 65th year to sign up, and Medicare should become effective July 1 in the year you enroll.

Those who miss signing up in time will end up paying higher premiums. The monthly premium increases by 10% for every year you're eligible but don't sign up for Medicare Part B.