Stop Guessing: Here’s Exactly How to Maximize Your Social Security

If you want more security in retirement, it pays to maximize your Social Security benefits. If you’re not sure how to do that, the good news is that you don’t have to guess.

If you follow these five steps, you’ll get the largest possible benefit for your situation.

1. Earn as much as possible throughout your career

Social Security benefits are based on your average earnings. So if you earn more, you’ll get more benefits. This is only true up to a point, though, because there’s an annual “wage base limit,” which is $142,800 in 2021. If you earn more than that, you aren’t taxed on the extra income and it won’t count toward determining your average earnings.

Of course, it’s simple to suggest earning more, but not so easy to make that happen. Steps you can take to boost your earnings include negotiating your salary and raises, improving your job skills, or taking on a side gig to supplement income from your day job.

2. Work for at least 35 years

Although benefits are based on average earnings, there’s a caveat. Only 35 years’ worth of earnings count.

Social Security adjusts your wages for inflation and calculates average monthly wages during the 35 years your earnings were highest. If you don’t have a full 35 years on the job, your average will be reduced because you’ll have some years of $0 wages included in your calculation.

Of course, if you work for longer than 35 years, that will mean some work years don’t count. If you put in more years at a higher salary, fewer low-earning years will end up in your average.

That means if you are earning more toward the end of your career, you’ll want to work longer than 35 years to maximize your benefits. If your salary has fallen, though, sticking it out on the job for more than 35 years won’t have any effect on benefits, since your current low-earning years simply won’t count in your average.

3. Wait until 70 to claim your benefits

Average wage isn’t the only important factor in maximizing your benefits. Your average wages determine your standard benefit, but you receive that amount only if you claim Social Security at a designated age called your “full retirement age” (FRA).

If you want your checks to start before FRA, you’ll have to accept a reduced benefit due to early filing penalties. But if your goal is to maximize your benefit, you’ll need to wait for benefits until well after your FRA — specifically, until age 70.

That’s because seniors who wait past FRA get delayed retirement credits, which can be earned until then. These permanently increase your benefits for each month of delay.

4. Invest in Roth retirement accounts

You can also maximize the amount of your benefits by making sure you don’t have to pay federal tax on them.

A growing number of seniors will be subject to tax on part of their benefits because the thresholds at which Social Security benefits become taxable aren’t indexed to inflation. But only certain income counts in determining if you hit those thresholds.

Distributions from Roth IRAs or Roth 401(k)s won’t count, so you can take as much money out of Roths as you want and not have to worry about giving the IRS a cut of your Social Security.

5. Choose your retirement location wisely

Finally, you can also maximize your Social Security benefits by avoiding state taxes on them. Just 13 states tax Social Security benefits. If you avoid living in one as a retiree, you won’t have to worry about sending some of your retirement money to your local government.

By limiting taxes, maximizing average wages, and earning delayed retirement credits, you should be able to score a hefty Social Security check. Remember, though, that even if you max out your Social Security benefits, they still won’t be enough to live on without supplementary savings — so make sure to have plenty of additional money in the bank before leaving the working world for good.

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