Delayed Retirement Credits

A reader from Pennsylvania asks about how delayed retirement credits are calculated based on specific months, and what to consider when not claiming exactly at one's Full Retirement Age (FRA) or at age 70.

"My friend, who is married filing jointly, hits his FRA in March 2026, at 66 years 10 months. He was going to claim at FRA, but now wants to delay to stay around AGI $150K for 2026 to get the entire senior bonus exemption/deduction.

 I've heard Chris say that when not claiming precisely at one's FRA or age 70, one should consider the timing to avoid missing the start of delayed retirement credits, which are calculated only in a particular month of the year.

Please remind me how that works."

How Social Security applies the delayed retirement credits is indeed quite confusing. So, first, let's do the basics of delayed retirement credits.

You can delay filing for your Social Security retirement benefit past your Full Retirement Age (FRA), which, for our readers, is typically between ages 66 and 67. In your example, it was 66 years and 10 months, so the person you are asking for must have been born in 1959, and March 2026 is that person's FRA date.

If you delay past that, Social Security rewards you by increasing your benefit payment. (However, remember that if you delay, you also skip one or more payments.) Social Security increases your benefit 2/3 of one percent for each month past your FRA that you claim, up to the age of 70, after which you're awarded no more 'bonuses' for delaying.

That's where that often-cited "8 percent per year" comes from. Social Security technically credits you 2/3 of a percent per month for waiting. That, times 12 months, is 8 percent per year. However, there is a nuance: once you delay past your FRA, they only calculate and credit any delayed retirement credits once a year. And that's in January. So you begin the year with all the delayed retirement credits you earned from the previous year, but you didn't get them during those interim months.

Let's use your example to walk through the concept. Instead of me talking about it generically, I think it will be clearer if you see how it applies to a benefit starting with an FRA in March 2026.

If this person were to claim at their FRA in March 2026, they would receive their Primary Insurance Amount (PIA). But let's say they waited three months to claim – from March … to April … May … June. They waited until June to file. They would earn three months of the 2/3 percent per month, so their benefit would be increased by 2 percent because it was claimed in June instead of March.

However, for the monthly benefits payable in June through December of that year, they would still receive the same dollar amount they would have received had they claimed in March, with no credit for that 2% bump.

When would they get it? In January 2027, they would start to see the 2% increase as a result of the annual reconciliation process. That's when Social Security would look back at 2026 and say," Hey, look, they earned three months of delayed retirement credits (in our example), let's give them to them."

Social Security never reconciles that loss or makes up for it. The 2% increase you should have had from June through December (in our example), you will never get. It's just the way it works.

The only exception is once you reach age 70. If you claim in the month that you turn 70, Social Security will manually calculate and give you all the delayed retirement credits, in real time, up to that month. You don't have to wait until January of the following year for it to catch up.

For most people, it's not a big deal. (I probably wouldn't change my claiming strategy to try to maneuver around this.) Let's look at the tradeoff. If I'm going to delay, let me delay until the end of the year so I get all my credits immediately. Granted, the person would get 9 months of credits by waiting from March until December to claim, but they'd give up months of receiving a benefit at all.

When you look at the offset involved, I don't know that it's going to make a huge difference for most people. But it is a little annoying.

I don't believe there's a reason for this seemingly unfair practice other than it's just the way they've always done it. I think this was an old computer limitation that will hopefully be corrected as Social Security modernizes some of its computer systems.

 I've never read any rules from Congress that require delayed retirement credits to be handled this way. I believe it's a transactional, administrative relic from decades gone by, when Social Security essentially said, "Every December we're going to sit down in the back room for two days and we're going to calculate everybody's delayed retirement credits. We're just doing it once a year because we don't want to be pestered throughout the year." I can imagine such a conversation back in the 1950s – I don't know, I'm just imagining.

Today, in 2025, I don't see any justification. Social Security obviously can do timely calculations because they do so when you claim at age 70. So, why can't they for claims at age 69? Or 67?

Hopefully, my example was easy enough to follow, although it's still somewhat convoluted. In summary, at the top of each year, Social Security catches up on all delayed retirement credit adjustments for claims that occurred during the prior year. Any rate adjustment you earned in the previous calendar year is officially awarded to you in your January benefit that's payable in February. However, you will not receive the additional dollars earned during that period because you delayed your claim.  

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