The average Social Security benefit for a retiree works out to around $1,543 per month . It's not a universal benefit, though. Your Social Security benefit is customized based largely on your personal earnings history and the age you are when you claim benefits. That formulaic approach helps improve the program's fairness by tying what you get out of the program at least somewhat to what you out into it in the form of taxes.
It also means you have some level of influence over how large your personal Social Security check gets. These five Social Security secrets could help you get even bigger checks than you otherwise would have. Before using them, it's important to recognize that they all involve trade-offs between things like time, money, and effort. If you decide that it's not worth it to do what it takes to get that bigger Social Security check, that's your choice. Just be sure you have another source of income to cover your costs.
1. Wait a few years to collect benefits
You can collect your Social Security retirement benefits at any time on or after you turn 62. The longer you wait between your 62nd birthday and your 70th, the larger your monthly check will be. How much bigger? Well, that depends in part on what year you were born, but the concept is generally the same no matter what that year happens to be.
If you were born in 1960 or later, your full retirement age is 67. Taking Social Security at 62 would reduce your monthly check by 30% from what you'd get for taking it at full retirement age. On the flip side, taking Social Security at 70 would increase your monthly benefit by 24% from what you'd get for taking it at full retirement age. So if your full retirement age benefit would be $2,000 per month, you'd get $1,400 per month by starting at age 62 or $2,480 per month by starting at age 70.
The trade-off you face is that by starting younger, you get your money for longer. As a result, you have to consider decide what's more valuable to you, getting money sooner when you're more likely to use it or getting more money each month.
2. Work more years
Your Social Security benefit is based on your highest 35 years of income, indexed based on national average wage levels during those years. If you've worked fewer than35 years, some of those years will be entered as $0 of income in calculating your benefit amount. On the flip side, if your salary has increased over time such that you're earning more near the end of your career than you were near the beginning, you can replace low earnings years with higher ones.
There are a couple of key trade-offs with this choice. First, the Social Security benefit formula includes "bend points" that mean those low income years are worth more proportionally than the higher income years. That means your benefit won't increase quite as much as you may have hoped based on replacing a $10,000 income year with an $80,000 income year.
Second, working more years means you're working more years. If you love your job and expect a long and healthy retirement, then feel free to do so. If not, then you should seriously ask yourself if continuing to work for what amounts to a few extra dollars a month really will make that big a difference.
3. Earn more money each year
The higher your income, the higher the Social Security benefit you accrue based on that year's earnings, up to an annual limit. In 2021, that limit is $142,800. So if your income is below that amount, you can get yourself set up for a higher benefit by increasing your income. Unfortunately, that also has trade-offs involved.
For one, the same bend points issue applies here -- the higher your income the less incremental benefit you get from earning it. For another, for most of us, earning more means taking on another job, which means more hours working.
Another thing to consider is that these days, many "side hustles" involve being an independent contractor. That requires you to pay both the employer and the employee side of the Social Security tax, which makes it more expensive than drawing a straight salary from your employer.
4. Get your retirement savings inside a Roth IRA
Up to 85% of your Social Security income may be taxable, depending on your tax filing status and total income level. The income considered in that calculation includes otherwise tax-free income, such as the interest you'd get from tax-free municipal bonds.
Under current rules, one of the few sources of retirement cash that won't subject your Social Security to tax is taking qualifying retirement withdrawals from a Roth IRA. So if you can get most of the money you plan to use for your retirement inside a Roth IRA before you start collecting Social Security, you can increase the net amount of your check that you can keep.
The trade-off there is that either you need to start that plan decades in advance by saving inside a Roth 401(k) and/or Roth IRA or you need to convert your money from a Traditional plan to a Roth plan. The upside to Roth-style plans is that you get tax free withdrawals in retirement, but the downside is that you pay taxes on the money you put into those plans. That means your contributions or your conversions are taxable income in the year you make them. You might find that those up front costs are not worth the boost to your Social Security check later.
5. Get a one-time boost to your benefit check
As long as you're past your full retirement age, at the time you first claim benefits, you can ask Social Security to retroactively pay you benefits for as far as six months back. That retroactive claiming will give you a one-time boost, but it comes with a trade-off.
The trade-off is that it is not free money, but rather it is treated as though you claimed benefits six months earlier. Since your benefit amount is based on the age you are when you claim, taking this boost will cost you in the form of smaller monthly checks for the rest of your life.
Still, there can be good reasons to make this move. For instance, if you pass your 70th birthday without having claimed your benefit, that six month lookback window can get you money you otherwise would have permanently missed out on receiving.
Similarly, if you're wrapping up Roth IRA conversions of your retirement money, you might want to not start Social Security while you're still doing those conversions to keep your total tax burden down. Delaying Social Security until the start of the next year and claiming those benefits retroactively could potentially make sense in that scenario.
Plan for Social Security as part of your total retirement plan
Regardless of what you expect your Social Security benefit to be, chances are that it won't be sufficient on its own to cover the costs you'll face in retirement. While you can take advantage of these five secrets to get a bigger check, you should also focus your efforts on building enough of a nest egg to take care of the costs Social Security won't.
That way, you can spend less of your time worrying about the trade-offs you're making to get that bigger Social Security check and more of your time planning for ways to enjoy your retirement. When all is said and done, you've worked your career to reach that time in your life, and the more you can focus on enjoying your retirement, the better it's likely to be.