Ask the Expert: Postponing benefits

I know if I postpone taking Social Security past full retirement age, my benefit earns an 8 percent annual credit for up to four years. But must I keep working from 66 to 70 to qualify for those extra credits? And are the credits paid annually or in monthly increments? If I apply for Social Security when I'm 66 years and 9 months old, for example, will I get any extra credit?

You will. The credits are paid in monthly increments. If you file for Social Security nine months after your full retirement age, you'll earn three-fourths of one annual credit. The result: Your monthly benefit will be 6 percent bigger. And you don't have to keep working. You earn extra credit just for postponing your Social Security application.

Financial experts say in most cases, it makes sense to take advantage of this very attractive deal, if necessary by tapping your IRAs or 401(k) account after you stop working to cover your living expenses while you delay filing for Social Security.

That strategy can feel counterintuitive: People often see a Social Security check as a natural replacement for a paycheck -- and they typically want to keep their retirement accounts growing untouched as long as possible. But those accounts won't deliver four years of risk-free 8 percent annual growth. Maximizing your Social Security benefit by delaying your application is your best protection against running out of money in old age.

One caveat: If you aren't yet collecting Social Security at 65, you won't receive a Medicare enrollment notification. Make sure you call 800-772-1213 and sign up for Medicare within three months of your 65th birthday to avoid higher premiums.

The bottom line: For healthy Americans, the biggest retirement risk is outliving their money. Your best protection against that risk is taking Social Security as late as possible.

Websites with more information: 1.usa.gov/xlSCIy and bit.ly/9t3nWF