Your Financial Future: Delaying retirement leads to higher Social Security benefits

Social Security is one of the most important income sources for American seniors. According to a recent poll, more than 70% of retirees rely heavily on SS and 40% of the group rely entirely on their benefits. Because of this, it is important to maximize the amount of your family's benefit.

Today, we will be discussing the retirement benefits of Social Security. Both workers and their employers pay into the SS system for lifetime's wages. When a worker has 10 years of full-time earnings, they are considered fully insured by SS. To get 100% of your benefit, a worker must wait until full retirement age (FRA) to claim their benefit.

FRA depends on the year you were born. Everyone born before 1954 must be 66. People born after 1960 must be 67. Those born in between must be 2 months older for each year. Thus, someone born in 1958 must be 66 and 6 months. If you claim your benefit at FRA, you will receive your full benefit.

The youngest age to start your benefit is 62. Every year you begin before FRA, your benefit is reduced by 6%. That means someone born after 1960 who starts their benefit at 62 is giving up 30% of their monthly benefit for life. You will get more checks, but they will be smaller. Since SS is one of the only retirement benefits with a cost-of-living adjustment, taking payment early reduces future increases.

If you start SS before full retirement age and continue to work, you are subject to an earning test. If you earn more than $22,320 in a calendar year, you must pay back $1 for every $2 earned. After you reach FRA, there is no earnings test. Only earned income from a job or business count and not investment income or funds from a pension or IRA.

If you delay the start of Social Security benefits, you get an extra 8% for each year you wait up to age 70. That means someone born after 1960 would be getting 124% of their benefit for life including cost-of-living increases. This year the increase was 3.2%.

In a married couple, both people can receive SS benefits. First Social Security looks at each person's own earning record. If one party never worked outside of the home, they may qualify for a check based on their spouse's work record. You can get up to half of your spouse's check if you wait until your own FRA. To qualify, you must have been married for at least 9 months unless death was due to an accident.

Someone may be able qualify for this spousal benefit even if you are divorced if the marriage lasted at least 10 years, and you did not remarry. It does not matter if your ex did. If your spouse got a bigger check because they delayed their benefit, it does not increase your spousal benefit, but it does count toward survivor benefits. If your spouse dies and their benefit was higher than yours, you get their full check including any delayed benefits. You will no longer receive your own benefit. It is important to make good decisions about when to start SS in your 60s. Your decision will have a lasting effect on you and your spouse for the rest of your lifetime.

The Social Security Administration recently upgraded their website to make it easier to find information. It can be found at SSA.gov. Remember, the choices you make should consider the long-term impact, not just receiving more money now.

Gary Boatman is a Monessen-based certified financial planner and the author of "Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility."