Delayed Retirement Credits Explained – Social Security

People who delay starting their Social Security beyond their full retirement age get a bonus equal to two-thirds of 1% added to their Social Security checks for each month they wait to begin benefits. If your full retirement age is 66, that comes out to a 32% bonus if you wait until age 70 to file for benefits. If your full retirement age is 67, it ends up being an extra 24% if you wait until 70. If your retirement age is between 66 and 67, your age 70 bonus will be between 24% and 32%. (There is no bonus added after age 70.)

The rules regarding this bonus (the actual Social Security term is “delayed retirement credits,” or DRCs) cause lots of confusion with many seniors. Today’s questions come from folks who are having trouble understanding this issue.

And please pay particular attention to question No. 2 and its answer. Recently, many readers have been asking me questions like that one. But first I want to answer a question that gives some basic information about DRCs.

Q: I was born in 1954, so my full retirement age is 66. I am about to turn 68 years old. I was planning to wait until age 70 to apply for my Social Security, but some family financial issues are causing me to rethink that plan. I was expecting to get a 32% bonus by waiting until age 70. Am I going to lose all of that by filing now?

A: It isn’t an “all or nothing” situation. You will lose some of your anticipated bonus, but not all of it. As I explained at the beginning of this column, you get a delayed retirement credit equal to two-thirds of 1% for each month you delay taking benefits after age 66. So, if you file at age 68, you will get 24 months’ worth of credits, or about 16%, added to your full retirement rate.

Q: I turned 69 in March 2022 and that is when I applied for my Social Security. I was expecting to get a 24% bonus added to my Social Security checks, but it was slightly less than that. When I called the Social Security people to ask why, they couldn’t explain it to me. They said it might be a “computer glitch.” Do you know what is going on?

A: It’s not a computer glitch, but just a bit of an anomaly in the way these delayed retirement credits are doled out. If you apply for your benefits at age 70, then you will get all the delayed retirement credits added to your benefit rate at that time. But it’s a different story if you apply for your benefits before age 70, and that’s because the rules say you cannot get delayed retirement credits for a year until that year is over with. You said you were 69 in March of this year. If I am doing the math properly, that means you turned 66 (your full retirement age) in March 2019. So, when you applied for your benefits in March 2022, they added in all the credits you were due for 2019, 2020 and 2021. But they can’t give you the delayed retirement credits for 2022 until next year, so sometime in 2023, you will get a little boost in your Social Security check to add in the credits you are due for those first couple of months this year.

Q: My plan was to wait until 70 to start my Social Security. I turned 70 in August, but when I filed in early August, they told me I had the option of taking six months’ worth of retroactive benefits. The offer of an almost $18,000 back paycheck was very tempting, so I took it. But now I’ve learned I didn’t get the promised 32% bonus. My ongoing benefit is less than that. What happened?

A: By opting for the six-month retroactive check, you were using February 2022 (six months before August) as your Social Security starting date. So, instead of getting the 32% bonus you would have received had you waited until age 70 to file, you got a 28% bonus because you technically filed at age 69 and six months. So, the bad news is you’re getting 4% less from here on out, but the good news is you got that $18,000 back paycheck.

Q: I started my Social Security benefits when I was 70. I am getting $2,970 per month. My wife is 66 and never worked outside the home, so she is supposed to get half of my Social Security, or $1,485. But she is getting about $300 less than that. What is going on?

A: This is one of the Social Security provisions I’ve never understood. So, I can explain it to people, but I can’t give the rationale behind the rule. What that rule says is that a wife does not share in the delayed retirement bonus added to a retiree’s Social Security check. Her rate is based on your full retirement age benefit, not on the bonus-augmented Social Security rate you are actually getting.

Using my little desktop calculator, I’m guessing your full retirement age benefit rate is about $2,250. And half of that is $1,125, and I’ll bet that is what your wife is correctly getting from your Social Security account.

That’s the bad news. But pay attention to the answer to the next question for a bit of good news.

Q: I’m trying to do some estate planning for my wife. I took my Social Security at age 70. I am now 81 years old. I am getting $3,100 per month. My wife is 79. She gets her own Social Security check of $2,100 per month. If I die, what will she start getting from Social Security?

A: The “good news” I mentioned in my answer to the prior question is that the benefit rate payable to a widow includes the delayed retirement bonus. (Why a widow shares in the bonus but a wife doesn’t is something I can’t explain.) So, if you were to die tomorrow, your wife would start getting $3,100 per month. Or to be more precise, she would keep getting her $2,100 retirement check, and then she would get an extra $1,000 on your account to take her total benefits up to your current $3,100 level.

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