Bigger paychecks today bring bigger Social Security checks in retirement -- but that's not exactly exciting news for those who are just scraping by. Negotiating a raise or finding a new job can be good advice for some, but it's not feasible for everyone. Fortunately, they're not the only ways you can boost your Social Security checks either. Here's one strategy most people can use with a high rate of success.
How your time in the workforce affects your Social Security checks
When calculating your Social Security benefit, the government looks at your income during your working years -- but it doesn't always look at all your working years, nor does it always look at all of your income.
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The Social Security benefit formula only considers the money you've paid Social Security taxes on in your 35 highest-earning years, adjusted for inflation. Most people see their salaries climb over the course of their career as they gain more skill and experience in their field.
As a result, many who work longer than 35 years get more from Social Security than they would have if they'd stopped at 35 years or before. Their more recent, higher-earning years begin to take the place of their earlier, lower-earning years in their benefit calculation, leading to bigger checks.
Even working a single extra year can have a significant effect on your benefit. If you earned $50,000, adjusted for inflation, every year for 35 years, your Social Security benefit based on the current formula would be $1,927 per month.
But if you worked a 36th year and earned $60,000 that year, your benefit would rise to $1,935 per month. That's only an $8 difference, but it could amount to over $1,900 if you claim Social Security for 20 years. And if your income grows even further over time or you choose to work for longer, you could squeeze even more out of Social Security.
The only people this may not work for are those currently earning less than they did earlier in their careers or some high earners. In 2022, you only pay Social Security taxes on the first $147,000 you make. This limit was lower in previous years. Those who earn more than the maximum income subject to Social Security taxes might enjoy their extra money today, but it's not going to give them bigger benefit checks later.
Know the drawbacks of retiring too soon
Working longer than 35 years can help grow your Social Security checks, but working fewer years could cost you. If you only work 30 years, the government will add five zero-income years to your benefit calculation. This can shrink your checks considerably. Even one zero-income year has a noticeable effect.
If someone earned $50,000 per year, adjusted for inflation, for 34 years -- instead of the 35 years used in the example above -- they'd only get $1,889 per month from Social Security based on the current benefit formula. That's $38 less per month, or over $9,100 less over 20 years.
None of this means you have to work at least 35 years before you retire, though. That's always going to be your call. But if you're healthy enough to continue working and you want to get the most out of Social Security, it's worth sticking it out until 35 years. This way, at least you won't have any zero-income years weighing you down.
