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Short on Retirement Savings? Make This Key Social Security Move | The Motley Fool

While there’s no single retirement-savings figure that guarantees you’ll be able to cover all of your senior living expenses with ease, generally speaking, closing out your career with 10 times your ending salary is a good benchmark to aim for. But what if you’re nearing the end of your time in the workforce and you’re nowhere close? Imagine you only have about three or four times your salary tucked away in your IRA or 401(k) plan and only a few more working years to make contributions.

It’s a situation many seniors land in. The reality is that saving for retirement is hard, especially when other expenses, like mortgage payments, college tuition, and car repairs eat up so much of your income. But if that’s the scenario you’re in, here’s some good news — Social Security may be able to bail you out.

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Boosted benefits to the rescue

The great thing about Social Security is that it pays you a benefit every month for life. As such, the higher a benefit you can lock in, the easier it’ll be to compensate if your retirement savings aren’t as robust as you’d like them to be.

Imagine you’re entitled to a monthly Social Security benefit of $1,500 based on your earnings history once you reach full retirement age, or FRA, which varies from filer to filer and hinges on your year of birth. But let’s assume you were born in 1960 or later, which would make your FRA 67. You could claim your Social Security benefits at that age and collect your monthly $1,500 or choose to delay your filing past FRA and boost your benefits by 8% for each year you do.

Once you turn 70, you’ll no longer be able to accrue the delayed retirement credits that cause your Social Security benefits to grow. But if you postpone your filing three years past FRA, you’ll give your benefits a 24% boost.

Going back to our example, instead of looking at $1,500 a month from Social Security, you’d be in line for $1,984 a month instead. That’s an extra $4,608 a year — and it’s also a large-enough sum to help compensate for a lower retirement savings balance than you’d like to start off your senior years with.

Best of all, the higher monthly benefit you lock in by delaying your filing will remain in effect for life. Your nest egg, by contrast, is not guaranteed to last — even if you do enter retirement with 10 times your ending salary socked away. That’s why delaying your Social Security filing as long as possible is a smart way to buy yourself added financial security as a senior.

While you may need to extend your career by a few years to make going that route possible, you’ll be thankful for having done that if you wind up living a very long life and have a higher monthly benefit to collect for the rest of it.


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