In 2017, U.S. retirees received an average of $1,404 a month in Social Security benefits, which -- in the context of all our recurring expenses -- isn't really a lot of money. But while the government has a fixed formula for determining our monthly Social Security benefits, you may have more control over the size of your checks than you think.
Here are five things you can do to maximize your benefits.
1. Don't file for benefits until at least your full retirement age
Retiring early can be tempting, and many people choose to start taking their Social Security benefits at 62, which is the earliest age you can do so. But working until what the government considers your full retirement age (FRA) will significantly boost the size of your monthly checks. For people born in 1955, FRA is 66 years and two months. Anyone born after 1960 will have to work until 67 to receive what are considered "full" benefits. (You can find out exactly when you qualify for full benefits here.)
Claiming sooner reduces the size of your checks significantly. For instance, if you were born in 1955 and you started claiming benefits at 62 instead of waiting until your FRA of 66 years and two months, your monthly payments were cut by about 26%.
On the other side of the coin, you receive an 8% boost in your monthly benefits for each year past your FRA you delay claiming them. For example, if someone born in 1954 works for four years past their FRA of 66, their checks will be larger by 32%. (And possibly by an even greater amount, if those final years of work increased their average inflation-adjusted monthly earnings.)
2. Claim spousal payments
If your spouse earned significantly more than you did during your working years, it may make sense for you to apply for both your benefits and part of theirs as well. In some cases, you can claim up to one-half your spouse's full retirement benefits. Here's how the Social Security Administration (SSA) explains spousal benefits,
If you qualify and apply for your own retirement benefits and for benefits as a spouse, we always pay your own benefits first. If your benefits as a spouse are higher than your own retirement benefits, you will get a combination of benefits equaling the higher spouse benefit.
Even if you are divorced, if you were married for at least 10 years, you may still be able to claim benefits based on your ex-spouse's work history -- but only if you haven't remarried.
3. Minimize your taxable income while taking Social Security benefits
You can, of course, keep working after you start collecting benefits -- but if you do, you may want to watch how much you're earning, especially if you haven't reached your FRA.
For example, individuals below their FRA can earn up to $17,040 this year without it impacting their Social Security benefits. But the government deducts $1 from their total benefit payments for every $2 they earn above that limit. Those who have hit full retirement age are allowed to earn up to $45,360 a year before their benefits start getting reduced. (Needless to say, the government adjusts those limits annually for inflation -- but you get the gist.)
4. Work for at least 35 years
During your working years, you're paying into Social Security, which earns you credits toward your future benefits. Specifically, you receive a credit each time you earn a set amount of income in a given year. This year, it's one credit for every $1,320 you make, up to a maximum of four credits a year. Earnings above that will, of course, be reflected in the size of your checks -- but credits relate to your eligibility. You need to earn at least 40 credits before you can claim Social Security.
That means you could conceivably take Social Security with as few as 10 years of work under your belt. But to avoid getting seriously dinged by the government's math, you'll want to work for at least 35 years. That's because the SSA begins calculating your monthly benefits by averaging the inflation-adjusted salaries from your 35 highest-earning years. If you worked for fewer than 35, it will count some years when you earned zero toward that average, which will skew your monthly benefit result lower.
5. Maximize earnings during your working years
As I mentioned above, working 35 years is important to maximize your benefit, but so is earning as much money as possible during those years. Because the SSA determines your benefit based on your highest-earning years, it pays (literally!) to boost your annual income -- even if it's just for a few years. That means you may want to ask for raise, pick up a part-time job, or start that side hustle to boost your overall wages.
One reason why increasing your benefits matters
Finding ways to increase your Social Security benefit can be more than just a useful strategy for achieving a more comfortable retirement -- it can be a central one. Many people rely on the program for essentially all of their retirement income: According to the Social Security Administration, 39% of workers say they have no money saved for retirement. If you're in that situation or are simply behind schedule on building your nest egg, it's worth taking the time now to plan how you're going to maximize your benefits.