Some careers are more lucrative than others. While there are always exceptions, generally speaking, you’re apt to earn more money as a lawyer, for example, than as a social worker.
But sometimes, people pick lower-paying careers because they’re passionate about the work at hand or those careers lead to a better work-life balance. And there’s absolutely nothing wrong with signing up for a career that’s never going to pay you six figures if it makes you happy in other ways.
However, that could become more of an issue when it comes time to retire. The reason? People who work are generally entitled to monthly benefits from Social Security. But those benefits will be calculated based on your lifetime wages. And if you don’t manage to earn that much money, you could end up with a less generous monthly benefit throughout retirement, making it harder to cover your bills.
Even if you don’t have a particularly large benefit to look forward to based on your wage history, there’s one step you can take to eke out a higher benefit during retirement. And that could buy you a lot more financial flexibility once your career wraps up.
Delaying your filing could pay off
The monthly Social Security benefit you’re eligible for based on your earnings history is yours to collect once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in between, depending on your year of birth.
You’re allowed to sign up for Social Security before FRA — you can file once you reach age 62 — but doing so will result in a lower benefit. And if you’re not getting such a large payday from Social Security to begin with, that’s a hit you may not be able to afford.
On the other hand, if you delay your Social Security filing past FRA, your benefits will grow 8% for each year you hold off. This incentive unfortunately runs out at age 70, so you can’t delay your filing and keep growing your benefits indefinitely.
But say your FRA is 67 and you’re able to keep working a few more years. If you’re able to hold off on claiming Social Security until age 70, you’ll snag a 24% boost to your monthly benefit. And that increase will remain in effect for the rest of your life.
Don’t assume the worst
If you’re not a particularly high earner, you might assume that the monthly benefits you get from Social Security won’t be much to write home about. But actually, you have the power to lock in a much higher benefit that will give you more buying power throughout your senior years.
Of course, it’s always a good idea to build yourself a nest egg so you have an income source outside of Social Security to tap during retirement. In fact, that’s something even higher earners anticipating a larger Social Security benefit should do. But know that delaying your filing could also mean having a lot more money to enjoy.
The $18,984 Social Security bonus most retirees completely overlook
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