As of February 2022, the average monthly Social Security benefit payment for retired workers came out to $1,662.79 per month. Expenses can add up quickly in your nonworking years, and it would likely prove difficult to live on that amount even if you had relatively limited costs.
The good news is that there are steps that you can take to increase the amount of Social Security benefits you will receive. Here's how you can boost your monthly benefit above the average.
Increase earnings in your Social Security calculation period
Your Social Security benefits will be based on average indexed monthly earnings (AIME), which are calculated based on your 35-highest inflation-adjusted earning years. That means that it can make a big difference to work at least 35 years because even a few years calculated at $0 dollars can have a significant negative impact on the average across the calculation period.
The next step is to earn as much as possible across the 35 years that will be calculated. In addition to maximizing earnings, this can also mean working additional years to improve your Social Security calculation. Additional years of relatively high earnings will bump out years with lower income, increasing the amount of total earnings across your AIME calculation period and boosting the amount of Social Security benefit you will receive until you hit the maximum amount.
In 2022, the maximum, inflation-adjusted earned income amount subject to Social Security tax is $147,000 per year. Earning the corresponding maximum in at least 35 years of work history should allow you to receive the maximum Social Security distribution based on the point at which you begin taking benefits. While very few people will reach the maximum-taxable earnings threshold, increasing your earnings will still boost the amount of Social Security you receive, and there is also another way to boost your monthly benefit.
Wait longer to begin taking Social Security benefits
Deciding to begin taking Social Security benefits as soon as you are eligible or to delay receiving payments will have a big impact on the amount you receive on a monthly basis. The minimum age to begin receiving benefits is 62, and full-retirement age (FRA) will range between 66 and 67 depending on the year in which you were born.
Compared to taking benefits at FRA, taking benefits at age 62 will reduce your monthly Social Security benefit between 25% and 30% depending on when you were born. The chart below shows how much your Social Security distribution will be reduced by by taking benefits at 62 compared to your full-retirement age.
However, if you want to keep working past FRA or simply don't need to begin receiving benefits at that point, you can actually increase the amount you will receive by postponing your Social Security distributions. For each month that you delay taking benefits past retirement age, you can increase the amount that you will receive by an average of 0.65% — working out to an additional 8% increase on an annual basis. This means that you can boost your payment between 124% and 132% depending on your FRA if you wait until age 70 to begin receiving Social Security payments.
Waiting past FRA to begin taking benefits won't be a great fit for everyone, but it's an option at your disposal that can be used to significantly increase your monthly benefit. If you're earning more later in your career and aren't in a hurry to stop working, the higher average earnings and the benefit boost earned by delaying benefits past FRA mean that there could be multiple upsides to delaying retirement.
It's important to keep in mind that there's no one-size-fits-all solution. In addition to taking steps to increase the amount of Social Security benefits you receive in your nonworking years, it's also a good idea to have other saving and investment strategies in mind so that you can minimize stress and get the most out of retirement.
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