Social Security, applicable to survivors, the disabled, and the elderly, is an insurance program available to those individuals within the United States.
The Social Security Administration (SSA) is a federal agency tasked with administering these benefit payments.
One of the key components it is more widely known for is retirement benefits. 2024 saw the vast majority of around 72 million US citizens benefit from this. Monthly contributions open the door for future payments.
How the gears of the Social Security system work
Monthly contributions are drawn from the salaries of employees. This is done via payroll withholding and usually by the employer. Self-employed individuals make their contributions to Social Security when they file their federal tax returns. A maximum of four credits can be earned annually. At least 40 credits are required to be able to claim Social Security benefits.
Credits earned are dependent on the income that the worker receives. The 2025 credit threshold is $1,810. An important thing to remember is that credits earned only allow you to qualify for a benefit, but they do not determine the exact amount of benefit that will be gained. The money accumulated is distributed monthly to beneficiaries. What remains stays within the fund.
Finding the perfect time to take advantage of retirement benefits is crucial. The SSA has established and extended the full retirement age, based on when the individual was born. A select few individuals, only about 6.5% of the recipients, wait until the golden age to start collecting benefits. This decision is influenced by various factors such as projected longevity and possible other income sources.
Factoring in the best possible scenario for long-term gain
According to the official SSA website, it is advisable to wait until the age of 70 before collecting benefits. The method behind this seeming madness is that you will gain from “delayed retirement credits”. A good example of this is if you were born between the period 1943 to 1954, your full retirement age would be 66. Waiting till 70 will see your benefits increase by 8% annually.
This annual increase is over and above the annual inflation adjustments. Looking at the figures, that would give you approximately 76% more per month, that is, if you had claimed at the early age of 62 years. In the bigger scheme of things, this form of gain is much better and way more reliable than any other form of investment. This retirement accrual is not, however, applicable for those collecting benefits based on a work record of an ex- or current spouse.
This delayed credit ceases to exist at the age of 70. If you proceed to wait longer than 6 months after this age, you will lose out on your monthly benefits. Essentially, there is a 6-month “grace” period after reaching this age. Benefits are then paid retroactively. More than 6 months is a no-win situation, as these will be permanently forfeited.
How to get things activated for maximum gain
Benefit payments are not made automatically when you reach the age of 70. One is required to apply. This can be done as early as 4 months before the date of your upcoming 70th birthday. Be mindful, though, to apply in such a way as to let the benefits start within the month that you turn 70, for maximum gain. Automatic payments only commence in one specific scenario.
If the individual made use of these benefits at full retirement age, and later proceeded to suspend them until the golden age, benefit payments will commence again automatically at 70. Applications for these benefits can be done online or by visiting an SSA office. Make sure to familiarize yourself with the requirements before applying. Benefit payments work one month in retrospect, which means the first payment will be received the month after your birthday.
