In a recent posting on Reuters, Lynn Brenner writes about an example provided by T Rowe Price’s Christine Fahlund where someone who claims at 70 can double the monthly benefit that they would have received if they had claimed at 62. This is a surprising result. The usual calculation is that the difference between claiming at 62 and 70 is 76%. This calculation reflects the fact that at 62 a person will get three quarters of the benefit at 66 (full retirement age) and a benefit 32% higher at age 70.
Where then does the idea come from that the benefit can double when someone waits until 70? Ms Fahlund uses The Social Security Quick Calculator to get her result. The reason that the benefit doubles is that the Quick Calculator assumes that claiming occurs at the time a person stops working. Since the benefit at any age depends on work history, continuing to work from 62 to 70 can increase the benefit that someone claiming at 70 will receive.
The calculator does this calculation for a hypothetical person. It does not know the actual work history for any particular individual. How much your benefits will increase from 62 to 70 will depend on your actual work history. Because your work history is almost certainly different from the work history of a hypothetical person, the increase in your benefits will be different from the calculation provided by the Social Security Quick Calculator. So your benefit may double if you work until 70 and then claim, but then again it may not.
Fortunately, it is not hard to find out what your situation actually is. Social Security does a similar calculation in Your Social Security Statement. (If you do not have a statement you can go either go to www.ssa.gov/estimator/ or www.socialsecurity.gov/mystatement and get the same information.) Look at what the statement says about the benefits you will receive at 62 and 70, respectively. Divide one into the other and you will see whether your benefit will double. Mine is 86% higher.
Whatever the increase, you may not want to wait as long as 70 before claiming your benefit. Every year you wait, you will lose benefits that year. To determine the best strategy for you and your wife, order a report from www.socialsecuritychoices.com. Our calculator takes these trade-offs into account so you can determine the best time to claim your benefits.