If you’re like most people, you know very little about Social Security. You may not know when you can start collecting it, for example, and you might have no idea how much it pays its recipients, on average. It’s smart to learn more about Social Security, because it’s likely to provide a meaningful chunk of your income for many years of your life.
The more you know about it, the smarter moves you can make — now and later — that can help you get as much as possible from Social Security.
1. Learn how Social Security works
Start by learning how Social Security works. The system is designed to collect taxes from those who are currently working and to use them to pay what’s due to beneficiaries. This has worked well for many decades, creating annual surpluses, but as people are living longer and the ratio of workers to beneficiaries has shrunk a lot, surpluses may be ending soon — if Congress doesn’t take some action. (There’s a decent chance that it will, as the program is so vital to so many.)
Qualifying for Social Security is easy for most of us. You simply have to collect 40 quarterly “credits” — which are currently valued at $1,510 and will be $1,640 for 2023. You can collect up to four such credits per year, if you earn at least $1,510 in four quarters, which would total just $6,040. Over 10 such years, you’d fully qualify. That’s a fairly low hurdle, and it means that most people will qualify after working just 10 years.
If that’s all you work, though, your future benefits will be paltry — because the formula that determines your benefits bases it on your earnings (adjusted for inflation) in the 35 years in which you earned the most.
2. Learn what to expect from Social Security
The average monthly Social Security retirement benefit was recently $1,677 — totaling about $20,000 per year. The maximum monthly payout is currently $4,194 (about $50,000 annually), but it’s very hard to qualify for that — and for most of us, probably too late to even try.
3. Learn how to increase your benefits
Fortunately, there are ways to increase your benefits. Clearly, the more you earn (up to a point), the more you’ll collect in the future (up to a point). It’s worth trying to maximize your earnings for this reason alone. You might ask for a raise — every few years — or seek a higher-paying job, or move into a higher-paying career. You might also take on a side gig or two for a short or long period.
Simply making sure you work at least 35 years can make a big difference, too. If you earn high salaries but only work for 25 or 30 years, the Social Security Administration will be incorporating 10 or five zeroes, respectively, into its calculations when determining your benefit. Once you’ve worked 35 years, every additional high-earning year you work will kick out the lowest-earning year, further beefing up your benefits.
4. Learn your full retirement age
Another way to boost your benefits is by timing when you start collecting them. You need to know your full retirement age for this — it’s the age at which you’ll be eligible to collect the full benefits to which you’re entitled, based on your earnings record. For most of us, that age is 66 or 67. For those born in 1960 or later, it’s 67.
5. Think about when you might start collecting
You can start collecting your benefits as early as age 62 and as late as age 70. Starting before your full retirement age will make your checks smaller, but you’ll collect more of them. Starting after your full retirement age, up to age 70, will make them bigger (by about 8% per year after your full retirement age), but you’ll collect fewer checks. (You can start collecting benefits after age 70, but you won’t make your benefits any bigger, so that would just be leaving money on the table.)
It’s good to think about when you’re best off starting to collect your Social Security checks. If you’re not in good health, or many relatives have died young, or you simply need money as soon as possible, starting early can make plenty of sense. But if you stand a decent chance of living a longer-than-average life, delaying to maximize your benefit is a smart move.
The more you know about Social Security, the savvier your decisions regarding it can be, and the more you may be able to collect from the program.
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