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The average Social Security recipient collects about $1,563 per month from the program, which amounts to $18,756 per year. That’s no small chunk of change, but it’s also a far cry from the maximum benefit of $3,895 per month.
For those who are motivated, it’s possible to do significantly better than average by taking a few crucial steps. Consider these strategies to increase your Social Security benefit at retirement.
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1. Work at least 35 years
The government bases your Social Security benefit on your average monthly income over your 35 highest-earning years, adjusted for inflation. So one of the easiest ways to boost your benefit is to just stay in the workforce long enough, because if you don’t work at least 35 years, you’ll have zero-income years factored into your benefit calculation, which will shrink your checks.
Working more than 35 years is often a good idea if you’re able to do so since most people earn more later in their careers than when they first started out. By working longer than 35 years, their later, higher-earning years begin to replace their earlier, lower-earning years in their benefit calculation. This results in larger checks when they eventually sign up.
2. Boost your income
Anything you can do to increase your income will also help your Social Security benefits later. Asking for a raise, switching employers, or starting a side hustle are just a few ways to accomplish this.
The most important thing to remember is you have to pay Social Security taxes on your income in order for it to help your benefits. A side hustle where you get paid in cash that you don’t report to the government won’t boost your checks, and it could land you in trouble with the IRS.
The only people this tip won’t work for are those whose taxable income exceeds $142,800 in 2021. This is the maximum income subject to Social Security taxes for the year, so income over this amount won’t boost your benefits. This limit will rise to $147,000 for 2022.
3. Delay benefits
Signing up for Social Security right away at 62 is common, but it also causes many to permanently shortchange themselves. The government assigns everyone a full retirement age (FRA) based on their birth year. For today’s workers, it’s somewhere between 66 and 67. You can sign up before then, but doing so reduces your benefits.
Those who sign up at 62, for example, only get 70% of their full benefit per check if their FRA is 67 or 75% if their FRA is 66. For someone who qualifies for the average $1,563 benefit at their FRA of 67, that means they’d only get $1,094 per month if they sign up at 62.
Over a long life, people who sign up early will get less from Social Security overall because of this permanent benefit reduction. The people who collect the most in these circumstances are usually those who delay benefits. Every month you delay signing up increases your checks until you reach your maximum benefit at 70. That’s 124% of your full benefit per check for those with an FRA of 67 and 132% for those with an FRA of 66.
On the other hand, if you don’t expect to live into your 80s, though, signing up early might actually be the better move. By delaying benefits, you risk getting little to nothing from Social Security at all.
Then, there are people who can’t afford to delay benefits and may have to sign up earlier than they’d like just to pay their bills. Married couples may be able to work around this by having one spouse delay while the other claims early, but for single adults, delaying may not be an option.
One size does not fit all
It’s ultimately your choice to decide which of the above strategies will work for you. Plan out the best approach for yourself right now, and be open to reevaluating it as your finances and long-term goals change. If you’re serious about sticking to your plan, you should have a good shot at beating the average Social Security benefit.
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