The average retiree collects about $1,500 in Social Security benefits per month. This can vary up or down depending on your lifetime earnings, and most importantly, when you decide to start taking benefits.
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Inflation has played a key role in Social Security benefits and how much they cover for the average American. In the past 12 months alone, prices have increased by a whopping 6% in total. To put that into perspective, inflation remained close to zero for most of the past decade, and in less than a year, prices rose in nearly every major category. Food prices in particular – a sector that has a major impact on seniors living on a fixed income – have increased by more than 12% in some categories.
To alleviate this, the cost of living adjustment will be 5.9% next year — the largest COLA in more than 40 years. If, like millions of Americans, you find yourself still needing more, here are some tried-and-true strategies to give you a significant boost in your income.
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The Big One — Deferred Retirement Loans
One of the most important factors in determining your Social Security benefit is timing. The earliest you can apply for Social Security benefits is 62, with the latest being 70. The sooner you receive benefits, the less you will receive; the longer you wait, up to 70 years, the more you get.
Depending on your benefit amount and what age you decide to start receiving benefits, you could nearly double the benefits you receive each month. This is because if you wait, you can use deferred retirement credits.
Deferred retirement credits are the financial reward Social Security gives you for delaying claiming your retirement benefits, AARP explains. Credits start accruing the month you reach full retirement age (that’s 66 and 4 months for those born in 1956 and gradually increases to 67 for those born in 1960 and later).
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For every month from your full retirement age to age 70 that you delay filing benefits, the Social Security Administration will increase your final benefit by about two-thirds of 1% — a total of 8% for each year you wait. This means that retirees who reach full retirement age at 67, but delay claiming it until age 70, will receive an extra 24% on their monthly benefit.
The credits accrue up to age 69, but work somewhat in reverse if you decide to take benefits early.
According to the SSA, “If an employee begins receiving benefits before his/her normal or full retirement age, the employee will receive a reduced benefit.” It adds that an employee can choose to retire as early as age 62, but this can lead to a reduction of as much as 30%.
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Assuming an average payout amount of $1,500, that means your check can now be reduced to $1,050 when you retire at age 62. If you wait until 70, that check will be about $1,888, assuming average benefit and 8% year-over-year accrual at full retirement age.
That’s a whopping $800 difference – and all you have to do is wait.
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This article originally appeared on GOBankingRates.com: Social Security: How to Increase Your Benefit by $800