The $432 Monthly Raise at 67 That Most Social Security Claimers Miss

For many retirees, an extra $432 per month could mean the difference between financial worries and being on track for retirement. The good news is that many seniors do have the option to boost their Social Security benefit by around that much each month.

However, this option isn't open to everyone, and it comes with a big catch that you must be financially prepared for. Still, the payoff could be huge, and most people aren't aware of it, so it's worth looking into. Here's what you need to know.

This strategy could add $432 to your monthly check

One of the best strategies to increase your Social Security check is to voluntarily suspend your benefits.

This option is available to you if you claimed Social Security early, have now reached your full retirement age (FRA), and you aren't 70 years old yet. Your FRA is 67 if you were born in 1960 or later, and it's between 65 and 66 and 10 months if you were born earlier.

Voluntary suspension means that you temporarily pause your payments. You get to decide how long you want that pause to be, but if you want the biggest impact, you'll pause payments right at your FRA and keep them suspended until your 70th birthday.

How does voluntarily suspending benefits increase your check?

Voluntarily suspending your benefit increases your future Social Security payments because it allows you to earn delayed retirement credits.

Delayed retirement credits are worth two-thirds of 1% per month. They are earned each month you don't get a benefit from the time of your FRA until age 70. This monthly increase of two-thirds of 1% adds up to an 8% annual benefits boost, and it makes a big impact.

For example, say you claimed Social Security early and are getting a benefit of $1,800 per month. If you suspend those benefits right at 67 and keep them suspended until 70, you'll earn the full three years of available delayed retirement credits available to you.

Your check increases to $2,232 in this scenario, which is $432 more per month.

What's the catch with this strategy?

While an extra $432 a month is nice, it doesn't come without strings attached. The most obvious downside is that you won't get your monthly Social Security benefit between your FRA and 70. You'll pass up all the income you could have collected during the three years your benefit payments were paused.

The other downside is that suspending your benefit also results in the suspension of spousal or dependent benefits that were claimed on your work history. So if your spouse is collecting spousal benefits or your disabled child is getting Disabled Adult Child benefits, those would also be suspended. The only exception is for a divorced spouse getting benefits on your record. They won't be impacted.

How long to break even for voluntary suspension?

If you're deciding whether voluntary suspension makes sense for you, your breakeven age is a key factor to consider. That's the age you'd have to live to in order to collect enough higher benefits to break even for the income you missed.

If you suspend at 67 and miss three years of payments, that would have been $1,800 per month, so you would lose $64,800 in income. But you would get an extra $432 per month when you do claim.

To figure out how many months it takes for that $432 to make up for the $64,800 missed, you'll need to divide $64,800 by $432. Doing this math shows it takes you 150 months or 12.5 years to break even.

So, if you live beyond 82 1/2, you'll end up with more lifetime income.

Should you voluntarily suspend benefits?

Increasing your income by a guaranteed 8% per year goes a long way toward making you more secure in retirement. There aren't a ton of options for retirees to get a risk-free 8% return, especially given that it's a higher yield than the 10-year Treasury rate.

Of course, not everyone has the money to stop their benefits, and potentially their spouse's and dependents' benefits as well. And not everyone should. This strategy may be a good one for you if:

• You don't need the income from Social Security.
• You want the opportunity to have a few lower-income years to do Roth conversions.
• You're above the thresholds where you're taxed on benefits and don't want to be for a while.
• You decide you'd rather prioritize getting a higher income later.
• You think you'll live long enough to break even for the missed benefits.

It's certainly worth considering, especially since data from the National Bureau of Economic Research shows that later claims pay off for most retirees.

Bottom line

Voluntary suspension of Social Security benefits is a strategy that is often overlooked when people make their retirement plan. But if you've claimed Social Security before 70 and you've now decided you want to increase your monthly benefits, this is a great option.

You should take a careful look at your budget, run the numbers on your breakeven analysis, and ensure you're making an informed choice about what strategy is best for you. Since Social Security is a guaranteed source of income for life, and one with built-in inflation protections, maximizing your monthly benefits often pays off if it's possible, so don't overlook this option for doing just that.