But what if you decide to apply for benefits at age 62 when your FRA is 67? You would be subject to five years of early deposit penalties, which equals 5/9 of 1% for the first 36 months you claim pre-FRA benefits and 5/12 of 1% for each month you receive checks before this date. Your check for $1,657 would decrease by 30% in total due to these penalties and return to approximately $1,160. That’s a difference of $497.
That’s a big drop, but you might be wondering where the $900 increase comes in. To increase your advantage that much, you’ll have to wait past FRA and claim checks for the first time at age 70. . By doing so, you would earn the maximum amount of Deferred Retirement Credits, which become available to those who do not receive their first Social Security benefit until after FRA.
Deferred Retirement Credits are worth 2/3 of 1% per month, so earning three years of them by claiming checks at 70 instead of 67 would result in a 24% increase over the amount you would have received in FRA. Adding 24% to a standard benefit of $1,657 would bring it to about $2,055 per month. That’s $895 more per month than the payment that would have been made if your checks had started at age 62.
Of course, if your standard benefit is below or above the average of $1,657, the specific numbers would be different. But in the end, you’d have a lot more monthly money from Social Security if you delayed depositing checks until age 70 rather than claiming them at age 62. This could come in handy later in life if your savings are dwindling.