Signing up for Social Security as soon as you turn 62 can shrink your checks by up to 30%. In some cases, that could amount to hundreds of thousands of dollars in lost benefits over a lifetime. But delaying benefits isn't always wise or feasible. You might not be able to delay if you were forced to retire unexpectedly and you may not want to if you don't believe you'll live past your 70s.
Fortunately, there are still things you can do to maximize your benefits, even if you have to sign up at an early age.
Ensure that no zero-income years factor into your benefit calculation
The Social Security Administration bases your benefit on your average monthly income over your 35 highest-earning years, adjusted for inflation. This is known as your average indexed monthly earnings, or your AIME.
Workers who haven't worked for at least 35 years could still be eligible for benefits as long as they've earned at least 40 credits. In 2021, one credit is defined as $1,470 in earnings, and you can earn a maximum of four credits per year.
But if you have fewer than 35 working years under your belt, the government includes some zero-income years into your calculation. This significantly reduces the size of your monthly checks.
Consider someone who earned $50,000, adjusted for inflation, every year for 35 years. The AIME for that person would be $4,167. But if that same person only worked for 34 years, the AIME figure would drop to $4,047 because of the zero-income year included for the 35th year. That would result in a smaller Social Security check.
If possible, work at least 35 years to avoid this happening to you. Working more than 35 years could be beneficial if you're earning more now than you did when you were starting out in your career –these more-recent, higher-earning years will replace lower-earning years in your benefit calculation, resulting in a larger monthly check.
Do everything you can to increase your income today
Since your Social Security checks are based on your income during your working years, anything you can do to increase your annual income will also raise your Social Security benefit.
The one exception to this rule is if you earn over $142,800 in 2021. That's the maximum income subject to Social Security taxes. Since you're not paying Social Security taxes on anything over this amount, that extra income doesn't help your benefits, either. But this earnings limit won't apply to most people.
There are several options for increasing your income. Some examples include:
Pursuing a promotion
Obtaining advanced degrees or certifications
Starting an extra job
Think about which options appeal to you most and how you could make them happen. You don't have to stick to just one, either.
Coordinate with your household members
Married couples can get the most out of Social Security by deciding when each spouse signs up for Social Security. If both have worked long enough to qualify for benefits, each is entitled to either that person's own benefit or a spousal benefit — which is up to 50% of the higher-earning spouse's benefit at full retirement age (FRA) — between 66 and 67, depending on birth year. The Social Security Administration automatically gives you whichever benefit is higher when you sign up.
Just because you have to sign up for benefits early doesn't mean your spouse has to. Your partner can delay benefits to qualify for larger checks. Then, when your spouse signs up, the Social Security Administration will switch you over to a spousal benefit if it will net you more than what you're earning based on your own work record.
Though it's rare, others in your household might also qualify for Social Security benefits on your work record. These include dependent children; adult children disabled before the age of 22; and possibly grandchildren, adopted children, and step-grandchildren if you're responsible for their care. To get the most out of the program, make sure to claim Social Security benefits for everyone in your household who qualifies.
Claiming Social Security early isn't always a mistake. As long as you understand the consequences and follow the tips above to maximize your benefit, you can still get a lot of money from the program.
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