Social Security is a guaranteed source of income in retirement, but how much you'll get from the program is up in the air. You might think that Social Security is a future concern, but the decisions you're making right now, no matter your age, can affect the size of your benefit checks, and, by extension, how comfortable your retirement is. If you want the largest checks possible, here are five things you need to do.
1. Work as many years as you can
Your Social Security benefit is based upon your average indexed monthly earnings (AIME). This is your average monthly income over your 35 highest-earning years, with adjustments for inflation. Those who haven't worked at least 35 years have zeros factored into their calculation, which brings down their AIME considerably. Those who have worked less than 10 years aren't eligible for Social Security based on their own work record at all.
Working longer than 35 years is best if you can because then your lower-earning years drop off and are replaced by higher-earning years, which raises your AIME. People typically earn more later in their careers than they do when they're just starting out, so extending your time in the workforce, even if it's just by a year or two, can bring larger Social Security checks.
2. Verify the accuracy of your Social Security earnings record
Remember how I said that your Social Security benefits are based on your income during your working years? The Social Security Administration keeps a record of that -- your earnings record. This is based on your tax returns for each year, and it's usually pretty accurate, but sometimes mistakes happen. The SSA might confuse you with someone else who has a similar name. You might accidentally transpose a couple digits in your Social Security number or forget to notify the SSA when your name changes. All these things can result in your income for the year being improperly reported or not reported at all.
Errors like these can wrongfully reduce your Social Security checks, so you need to double-check the government's records to avoid these issues. Create a my Social Security account to view your earnings record and check the information listed there against your own tax returns. Don't get rid of your tax returns until you've verified the accuracy of your earnings record. If you spot any errors, submit a Request for Correction of Earnings Record form to the SSA along with any documents you have to prove your income for that year.
3. Seize every opportunity to increase your income
Anything you can do today to increase your income will help raise your AIME and your Social Security checks, not to mention it'll give you more spending money today. The easiest ways to do this are by pursuing promotions at your existing job, switching employers, or working overtime. More extreme measures could involve going back to school or starting your own side business. Just make sure you report any side income you earn to the government or it won't help your Social Security benefits and you could put yourself at risk of an audit.
Stay mindful of the $132,900 ceiling on Social Security tax in 2019. It shouldn't affect most people, but if you earn more than this, you won't pay Social Security tax on that additional income, so any earnings over that amount won't help increase your benefits any further.
4. Delay benefits
You must wait until your full retirement age (FRA) if you want the full benefit you're entitled to based on your AIME. Your FRA is either 66 or 67, depending on your birth year. You can start as early as 62, but then the SSA docks your checks to account for the extra months you're claiming benefits. You'll only get 70% of your scheduled benefit per check if you begin benefits at 62 and your FRA is 67 or 75% if your FRA is 66.
Delaying benefits past your FRA will increase your checks until you hit the maximum benefit at 70. The maximum benefit is 124% of your scheduled benefit per check for an FRA of 67 or 132% for an FRA of 66. Not everyone can afford to delay benefits, but if you can and you expect to live a reasonably long life, you'll probably increase the amount that you receive over your lifetime. Even if you can only afford to delay benefits for a few months, it will still make a difference in the size of your checks.
5. Coordinate with your spouse
Married couples can maximize their benefits by coordinating their Social Security strategies. If both partners earn about the same amount, it makes sense for both to delay benefits as long as possible. But if one person earns significantly more than the other, it makes sense for the higher-earning spouse to delay benefits until age 70 or as long as possible to get larger checks. The lower-earning spouse can begin benefits early if need be to help the couple get by until the higher-earning spouse begins claiming their checks. At that point, if the lower-earning spouse is entitled to a larger spousal benefit than what they're getting based on their own work record, the SSA will automatically switch them over.
Maximizing your Social Security benefit isn't too complicated once you understand how it's calculated. Try a few of the tips above. You may not reap the benefits for a few decades, but when the time comes to claim that first check, you'll be glad you thought ahead.