The average retiree can expect to get about $1,553 per month, or $18,636 per year, from Social Security. It’s no small sum, but it’s also not enough to cover most retirees’ expenses.
Most people will need some personal savings to cover the difference. If you want to stretch those dollars further, take the following steps to maximize your Social Security benefits.
Work as long as you can
The government looks at your 35 highest-earning years, adjusted for inflation — also known as your average indexed monthly earnings (AIME) — to determine your Social Security benefit. One of the easiest ways to boost your checks is to make sure you work at least 35 years. This ensures no zero-income years will tank your benefit.
If you earned $40,000 per year, adjusted for inflation, every year for 35 years, your monthly benefit, based on the current Social Security formula, would be $1,644 per month. But if you only worked for 34 years, your benefit would drop to $1,613. Over 25 years, that’s a difference of $9,300.
Working longer than 35 years could net you even larger checks. Most people earn more money later in their careers than they did when they were first starting out. Those who work more than 35 years see those earlier, lower-earning years drop out of their benefit calculation as more recent, higher-earning years replace them. This leads to larger benefit checks.
Of course, it isn’t always possible for everyone to work as long as they’d like. Health, family, and job issues could force you to retire earlier than planned. But whenever possible, try to work at least 35 years to help boost your benefit.
Do what you can to raise your income now
Another simple way to boost your AIME is to take steps to maximize your income right now. There are several ways you could approach this, including:
Pursuing promotions at your current job
Starting a side hustle
But these things will only help you if you’re paying Social Security taxes on the money. In 2021, you only pay these taxes on the first $142,800 you earn. Income above that amount won’t increase your Social Security benefits. But it can still help your retirement if you stash more of your savings away in a retirement account.
Choose your starting age carefully
The examples of the $1,644 and $1,613 benefits discussed above assume you waited to claim until your full retirement age (FRA). That’s 66 for those born between 1943 and 1954 and rises by two months every year thereafter until it reaches 67 for those born in 1960 or later. But you don’t have to wait until your FRA to sign up for benefits.
As long as you’ve worked for at least 10 years, you can sign up for Social Security benefits as early as 62. But there’s a trade-off. Because you’ll be receiving benefits for more years, you’ll get less money per check. Those with an FRA of 67 who sign up at 62 will only receive 70% of their full benefit per check, while those with an FRA of 66 will receive 75% of their full benefit per check if they sign up at 62.
The right starting age depends on your personal situation. If you don’t believe you’ll live past your 70s, or you need the money to help cover your expenses, starting early could make sense. But if those don’t apply to you, delaying could be wise.
Every month that you put off claiming Social Security, you’ll increase the size of your checks — at least until you reach your maximum benefit at 70. That’s 124% of your full benefit per check if your FRA is 67 or 132% if your FRA is 66.
If you qualify for the $1,553 average monthly check at your FRA of 67, the age you begin benefits could be the difference between $1,087 and $1,925 per month. Over 25 years, that could result in a lifetime benefit of anywhere between $326,100 if you sign up at 62 to $577,500 if you sign up at 70. So it’s not a decision to make lightly.
Don’t feel like you have to know right now exactly when you’re going to claim Social Security. There’s always room to make changes down the line if life takes an unexpected turn. But you should have some sort of plan in place that you can work from. Once you have an estimate of how much you can expect from Social Security, you can craft a solid retirement savings plan to help you cover what your benefits won’t.
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