The vast majority of American retirees receive Social Security retirement benefits, and as of the most recent data, the average beneficiary receives $1,658 per month, or $19,896 per year.
This is well below the maximum possible Social Security benefit of $4,194, and while it requires a "perfect storm" or qualifications to get the absolute maximum, there are several ways you could potentially increase your benefit to greater than the U.S. average.
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How your Social Security benefit is calculated
You can read our guide to Social Security benefits for the long version of how your Social Security benefit is calculated, but here's the 30-second version.
- The Social Security Administration (SSA) keeps track of how much you earn from employment each year.
- Your highest 35 years' earnings, up to each year's maximum, are indexed for inflation and averaged together to calculate your initial benefit at full retirement age.
- This amount is adjusted, depending on the age at which you decide to claim Social Security retirement benefits.
The three ways to increase your Social Security benefit
While the Social Security formula is rather complex and takes a ton of earnings into consideration, there are only three main ways for most workers to increase their Social Security benefit beyond the average -- work longer, earn more money each year, or wait longer to start collecting your benefit. So, let's take these one at a time:
1. Work longer
The Social Security formula takes 35 years' worth of earnings into account, and if you've worked for less than 35 years, zeros will be used when calculating your average earnings. But even if you've worked for 35 years, it might be in your benefit's best interest to keep going, especially if you're a higher earning.
I can use my personal situation to explain why. I have 25 years of work experience so far on my Social Security statement, but the first few was when I worked fast food jobs in high school and made a few thousand dollars each year. Many workers earn relatively small salaries when starting in their careers, relative to what they'll earn later on. In a nutshell, each high-earning year you work beyond the 35 considered by the SSA will remove a lower-earning year from the calculation and can make your benefit significantly higher.
2. Increase your income
This is perhaps the most obvious of the three, but it's still worth mentioning. Since the Social Security formula is based on your average income throughout your career, one way to increase your monthly benefit is to figure out a way to earn more money.
Earning more doesn't necessarily mean switching jobs. There have never been more side hustles available than there are now, and even picking up a very part-time income stream can make a difference in the benefit calculation.
3. Wait longer to claim your retirement benefit
Last, but certainly not least, perhaps the most effective way to increase your benefit is to wait longer to claim it. The Social Security Administration's normal retirement age (also known as full retirement age) is 67 for individuals born in 1960 or later, but Americans can choose to start their benefit at any time between 62 and 70. The benefit formula discussed earlier is used to calculate your primary insurance amount, or PIA, which is the amount you would get at full retirement age. However, claiming earlier or later than full retirement age can dramatically change your monthly benefit.
As an example, let's say that your normal retirement age is 67 and that your calculated PIA is $1,500. Here's what your Social Security benefit would be, depending on the age when you start receiving it.
|
Claiming Age |
% of Primary Insurance Amount |
Initial Monthly Benefit |
|---|---|---|
|
62 |
70% |
$1,050 |
|
63 |
75% |
$1,125 |
|
64 |
80% |
$1,200 |
|
65 |
86.7% |
$1,300 |
|
66 |
93.3% |
$1,400 |
|
67 |
100% |
$1,500 |
|
68 |
108% |
$1,620 |
|
69 |
116% |
$1,740 |
|
70 |
124% |
$1,860 |
Data source: Author's own calculations. Benefits rounded to the nearest dollar.
A $1,500 initial benefit would be below the national average. But waiting a year or two beyond full retirement age would push your benefit into above-average territory.
Why you should try to maximize your benefit
You may be wondering why maximizing Social Security is such a big deal, especially if you're actively saving in your 401(k), IRA, or other retirement plan. And the short answer is that unless you have a pension plan, Social Security is likely to be the only guaranteed and inflation-protected source of income you have in retirement. So, while you may have a substantial nest egg, maximizing Social Security can give your income more stability and can give you peace of mind after you retire.
