Social Security is like a safety net when you retire. By paying into the system during your career, you’ll receive income when you retire through the benefits program. Americans can begin claiming benefits between the ages of 62 and 70. The more time you wait to claim these benefits, the more money you’ll receive. While no one can tell you exactly what you’ll get when you retire, if you’re working, and paying social security taxes, you might be able to estimate a ballpark figure. Whether or not this is enough to live off of is entirely up to you. This is why it’s important to think about whether or not you should delay taking the benefits. Read on to see if delaying is right for you.

How traditional Social Security works

Social Security is intended to help support retired Americans who have paid into the system during their careers. Funded through the Federal Insurance Contributions Act or FICA, taxes are taken out of your earnings when you are employed in the United States. Half of these taxes are paid by you and the other half are paid by your employer. The contributions are mandatorily pooled together from workers which are then paid out through benefits to retirees who are eligible. Every year you work, for example, a portion of your taxable earnings goes into the Social Security pot. Once you reach an eligible age, you can start collecting some of this money back as opposed to contributing.

To collect Social Security you must be a certain age, disabled or a child or spouse of a recipient who has passed away. You would have needed to earn enough money and credits during your working years to collect as well. In 2019, for example, you would have received one Social Security credit for every $1,360 you earned. There is a maximum of how many credits you can earn per year. The dollar amount per credit is typically raised every year. These credits accumulate over the years you work and you’ll never lose them if you take a break from the workforce or switch jobs. Currently, you need to have worked for ten years or earned 40 credits to receive Social Security benefits. To be clear, you can’t retire at age 31 and expect to receive benefits. You need to reach the age of 62 or older in order to qualify. To determine the monthly benefit you’ll receive, your credits and age are all factored in.

The benefits of delaying

Up to the age of 70, the longer you wait to claim benefits, the more money you’ll receive. The maximum age to claim benefits is age 70, so it won’t do you any good to wait past that point to claim them. If you become eligible at age 62, however, for every age you delay past that point your income goes up by 8%. Let’s say you become eligible for Social Security benefits at age 62. If you claim them, you’ll only be receiving 70% of your total monthly benefit amount. At 65, for example, your monthly benefit will go up to 86.7%. You can also earn delayed-retirement credits by waiting to claim past your eligible retirement age.

To estimate how much you may receive, you can check out the Social Security calculator on their website. Keep in mind that if you check this calculator at age 40, this number may change if you stop working, or make more or less money in the future. The younger you are, the less accurate this calculator tends to be since you likely won’t be able to predict your future earnings.

To use an example with numbers, we’ll say, Sally who was born in 1955, loves her job and is healthy. Sally’s qualifying retirement age is 66 and two months. This is the point where Sally can claim 100% of her benefits of $1,420. This is the average monthly benefit in 2019. Sally wants to continue to work until her 69th birthday. She delays her benefit until then. When Sally eventually claims her Social Security benefit at the age of 69, her new monthly payout with be $1,742. This is 122.7% of her initial Social Security benefit. That’s 22.7% more than she would have received. By delaying Sally has increased her monthly benefit payment by $320.

Will Social Security be enough to live off of?

Just because this situation worked for Sally, doesn’t mean it’s always the right choice for you. There’s a lot to consider when trying to determine if you should delay or not. If you’re in good health and at a job you love, then it may be worth it to keep working longer or to delay receiving benefits. Even if you’ve retired from your full-time job at 60 and are currently working part-time somewhere you enjoy, it might be worth it to you to delay. In this situation you’re likely working less than you were, it’s hopefully something you enjoy and being that it’s part-time you still have time to travel, pursue hobbies, or spend time with family. Those are some of the perks of retiring after all. If you’re in poor health and unable to work any longer, the monetary benefits may not be worth it in the end. This is a choice you’ll want to take time and consider. There’s no right answer for everyone.

When contemplating whether or not delaying Social Security benefits is right for you, think about where you are financially and where you need to be. Hopefully, you’ve thought about what you’d like to have saved or invested long before you turn 66. With the average Social Security benefit being $1,420 in 2019, think whether or not you can make ends meet off of that figure.