Delaying Social Security Leads to Bigger Benefits Payments. 3 Ways to Help Make It Happen

Key Points

• You don't need to start your Social Security benefits and IRA withdrawals at the same time.

• You may wish to work more years -- and so consider what kind of work you can reasonably do.

• Adding a few more years of wage-producing work could also bolster your calculated benefits.

• The $23,760 Social Security bonus most retirees completely overlook ›

You probably already know that postponing your Social Security retirement benefits will make your eventual payments bigger. Specifically, as things stand right now, for every month after reaching your official full retirement age (or FRA) that you wait to claim, your future payments grow to the tune of 2/3 of 1%. That's 8% per year, for a little more meaningful perspective, which isn't a bad little pay bump.

And the program will continue adding this credit every month you postpone your payments all the way until you turn 70. With the average monthly Social Security check now worth $1,976, waiting this long to file for benefits can mean a few hundred extra bucks per month. It's easier said than done, however. Life's realities -- like health issues or expenses -- can get in the way.

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With that as the backdrop, here's a look at three things you can do to help yourself delay claiming Social Security's retirement payments for as long as possible, beefing up the size of your checks once you do decide to initiate these well-earned benefits.

Start your IRA distributions before your Social Security payments

Many retirees begin collecting Social Security payments and start living on their retirement savings right after they retire. They often have to, in fact -- life requires it. Even if the mortgage is paid off, groceries must still be bought and utility bills need to be paid.

You're certainly not required to tap both sources of retirement income immediately after you stop earning a work-based income. If you only need one or the other, only utilize one and let the other continue growing for at least a little while longer.

But why not claim Social Security benefits first and let your retirement savings continue to grow in the interim? There's certainly a case to be made for this alternative. For instance, if health issues create a better-than-average chance of shortening your life span, you may be better served by collecting as much Social Security as you can while you can. In this same vein, when you initiate your Social Security benefits can potentially impact your spouse's Social Security income later in life.

Conversely, if you've got a sizable stash of money in an ordinary (non-Roth) IRA or 401(k), taking more but smaller taxable distributions from these accounts by starting withdrawals at a relatively early age might reduce your total lifetime tax bill resulting from these distributions. Withdrawals from retirement accounts are also flexible, meaning you can take more, or less, as needed.

That's not the case with Social Security. What you get is what you get, and with one time-limited exception, once you start collecting Social Security you don't have the choice of stopping.

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Unfortunately, the only way to know for sure which of these plans makes the most sense for you is by pulling out a pencil and paper and doing a side-by-side comparison. This will require a bit of data-gathering just to make sure you've got all the information you'll need to do the math. But it would be time well spent if you've feasibly got the option of only tapping one source or the other when starting your retirement.

Consider the practicalities of working for more years

That being said, if delaying Social Security benefits for as long as possible means you'll also need to work -- at least part time -- to make ends meet in the meantime, some strategic career planning may be in order. Namely, you'll want to make sure you're able to continue working past an age when many other people are calling it quits.

And it's not just a matter of making sure your age doesn't translate into health-related reasons for leaving the workplace, although this is certainly something to consider. (For example, handling heavy equipment, tools, and materials can take a sizable toll on an older body. If the option to move to a more administrative role materializes, take it.)

Later in your career also isn't a time to sacrifice job security for a chance to work at a start-up that might be out of business within a year, for instance. The point is, you want to give yourself the very best chance of continuing to work well past your earliest eligibility for Social Security benefits.

Make as much money as you (reasonably) can for at least 35 years

Finally, not only will holding off on the initiation of your Social Security benefits make your eventual payments bigger, but postponing these payments could also give you more time to pay more Social Security taxes that bolster your future benefit.

Many people may not realize it, but when the Social Security Administration determines how much it owes you in retirement benefits, it looks at your 35 highest-earning (adjusted for inflation) years. Not working a total of 35 years doesn't mean you won't get anything -- the Social Security Administration simply credits you zero dollars' worth of income for every year less than 35 that you worked.

This, of course, results in a smaller benefit. Even if you're not "maxing out" your taxable work-based income, though, something is better than nothing if you'd otherwise have fewer than 35 years' worth of taxable wages.

But what if you've already worked a full 35 years? There may still be an upside to continuing to work. If you happen to be earning relatively more now than you did earlier in your career, these higher-earning years will replace any lower-earning ones when Social Security determines which of your work years are your 35 best in terms of taxable work-based wages.

Of course, working for longer also allows you to tuck more away into a retirement savings account. Just be realistic. If you physically shouldn't continue to work or if you're miserable while you're working, don't do it. No amount of money is worth lowering your overall mental and physical well-being at any stage of your life.

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