I have over 30 years to go before I can even think about claiming Social Security, but that doesn't mean it's not on my mind. I understand that the decisions I make right now determine the size of my checks in the future, and I'm doing all I can to squeeze the most out of the program. Here are three steps I'm taking to lock in large Social Security benefits in the future.
1. Continuing to work
I've already worked long enough to qualify for Social Security. I've earned over 40 credits during my career so far, where one credit is defined as $1,510 in earnings in 2022 and you can earn a maximum of four credits per year. But that doesn't mean I have nothing to gain from continuing to work.
Apart from the fact that I need a job to pay my bills, continuing to work is also boosting my future Social Security benefit. That's because the government bases your benefit on your average monthly income over your 35 highest-earning years, adjusted for inflation.
If I quit working right now, I could still claim a Social Security benefit once I turned 62, but it would be pretty small. I haven't worked 35 years yet, so I'd have a lot of zero-income years weighing down my average monthly income. By continuing to work, I replace those zero-income years with profitable years, and this brings up my average benefit.
I may even work longer than 35 years. If I do this, some of my earlier working years where I made minimum wage as a cashier in a grocery store will be replaced by my more recent, higher-earning years working as a freelance writer.
2. I'm trying to keep my income high
Since I know Social Security benefits are based on your income during your working years, I'm doing what I can to keep my income today high. As a freelance writer, I have a bit more control over how much I earn than the average worker. But there are still things traditional employees can do to boost their paychecks.
Working overtime or negotiating a raise can help. So can switching employers if you find a company willing to pay you more. You could also start a side hustle if you have some free time and a skill or service you'd like to share.
3. I'm saving a lot for retirement on my own so I can afford to delay Social Security benefits
Even though I could sign up for Social Security at 62, I'm probably not going to claim until 70. That means skipping eight years of checks, but as a reward for doing so, when I sign up at 70, my checks will be larger.
Not everyone knows this, but the government assigns everyone a full retirement age (FRA) based on their birth year. It's anywhere from 66 to 67 for today's workers. You're supposed to wait until this age to sign up if you want the full benefit based on your work history. Every month you claim benefits before your FRA reduces your checks a little, while every month you delay benefits increases your checks.
My FRA is 67 and if I delay until 70, I'll get 124% of my full benefit per check. If I qualified for the current average $1,665 monthly Social Security check at my FRA, I'd get about $2,065 per month at 70. But if I claim right away at 62, I would only get 70% of my full benefit per check, or about $1,166 per month.
I expect to live into my 80s or 90s, so even though I'll get fewer years of benefits by delaying Social Security, I'll probably get more money overall by doing so. Claiming a $2,065 benefit for 15 years would give me a lifetime benefit of $371,700. That's about $50,000 more than the $321,816 I would get by claiming a $1,166 benefit for 23 years.
But delaying benefits doesn't make sense for everyone. And even those who want to sometimes have a hard time covering their bills without Social Security's help in the early years of their retirement. That's why I'm saving as much as I can for retirement right now. I want to have a large nest egg so I can pay all my basic expenses and put off Social Security until I'm ready for it.
Everyone is different, so my Social Security strategy may not work for you. But if you haven't already thought about when you'd like to claim or how you can grow your benefits, now's the time to do so.