Chapter 20: Delayed Retirement Credits
The worksheets from Chapter 20 of Fifty-Five. Type your own numbers, or try an example from the book to see how each one works.
Your benefit at every age
Your own table of monthly benefits from 62 to 70, so you can see what each year of waiting is worth. The shares are for anyone born in 1960 or later.
The formula: Full-retirement-age benefit × Share for that age = Your benefit at that age
The calculator needs JavaScript. The paper worksheet below does not: it is the same arithmetic, written out.
The paper worksheet
Age 62: Your full-retirement-age benefit $__________ × 0.70 = Your benefit $__________
Age 64: Your full-retirement-age benefit $__________ × 0.80 = Your benefit $__________
Age 67: Your full-retirement-age benefit $__________ × 1.00 = Your benefit $__________
Age 68: Your full-retirement-age benefit $__________ × 1.08 = Your benefit $__________
Age 69: Your full-retirement-age benefit $__________ × 1.16 = Your benefit $__________
Age 70: Your full-retirement-age benefit $__________ × 1.24 = Your benefit $__________
Walk through it, step by step
- Write your full-retirement-age benefit from your Social Security statement in every row.
- Multiply it by the share in each row.
- Round to whole dollars.
- Compare your Social Security statement's own estimates for 62, 67 and 70. They should be close.
Check your answer
- Each row must be bigger than the row above it.
- Your 70 row divided by your 67 row should be 1.24.
- If you were born before 1960, your full retirement age is earlier than 67, so your shares are a little different. Use your statement's estimates.
Figures this worksheet uses, and where they come from: Shares of the full benefit for claiming before a full retirement age of 67: 0.70 at 62, 0.75 at 63, 0.80 at 64, 0.8667 at 65, 0.9333 at 66 (SSA, Starting Your Retirement Benefits Early); Shares of the full benefit for waiting past a full retirement age of 67 (8% a year): 1.08 at 68, 1.16 at 69, 1.24 at 70 (SSA, Delayed Retirement Credits).
What it takes to bridge the gap
If you wait, you need money to live on in the meantime. This shows how much savings it takes to cover the Social Security you're not collecting yet, and roughly when waiting pays off.
The formula: Monthly benefit you're skipping × Months you wait = Cash you need. If it comes from a pre-tax IRA: Cash you need ÷ (1 − your tax rate) = Amount to withdraw.
The calculator needs JavaScript. The paper worksheet below does not: it is the same arithmetic, written out.
The paper worksheet
Benefit you'd skip $__________ × Months you wait ______ = Cash you need $__________
Cash you need $__________ ÷ (1 − your tax rate) = Amount to withdraw $__________
Cash you need $__________ ÷ Extra benefit a month $__________ = ______ months ÷ 12 = ______ years after you start
Walk through it, step by step
- Write the benefit you'd get if you claimed now, and the benefit you'll get if you wait.
- Count the months you'll wait.
- Multiply the benefit you'd get now by the months. That's the cash you need to bridge.
- If it comes from a pre-tax account, divide by what's left after your tax rate. Ask your tax preparer for your rate, or use Chapter 7's bracket worksheet.
- Subtract the two benefits. That's the extra you'll get each month.
- Divide the cash you need by the extra each month, then by 12. Add that to the age you'll start. That's roughly when waiting pays off in total dollars.
Check your answer
- The amount to withdraw from a pre-tax account must be bigger than the cash you need, because of the tax.
- The pay-off age is usually somewhere between 78 and 83 for people in good health with average benefits.
- The bridge money is often money you'd have to withdraw anyway. Pulling it out in the quiet years can lower your future RMDs and IRMAA.
This worksheet uses only the numbers you type. It has no government figure built in.