Seniors are usually the ones claiming Social Security, but they're not the only people who should be thinking about it. If you plan to rely upon Social Security in retirement, you need to understand how the decisions you make today will affect your benefit later.
Here are three things you can start doing right now to maximize your Social Security benefit, even if you're decades away from claiming.
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1. Boost your income today
Anything you can do to increase your income today will likely also boost your Social Security checks in retirement. The government bases your checks on the amount you've paid in Social Security taxes over the years. This is often, but not always, the same as your income.
High earners don't pay Social Security taxes on all their income. In 2022, the government only taxes the first $147,000 you make. Anything over that is great for saving or spending today, but it won't help your Social Security checks. Most people won't run into this problem, though.
Securing a raise, finding a better-paying job elsewhere, or working overtime can all help your Social Security checks. You could also start a side business. Think about what interests you most and how you might monetize it.
2. Work longer
Working longer can often boost your Social Security benefit, especially if your income increases over time. The benefit formula looks at the money you've paid Social Security taxes on during your 35 highest-earning years, adjusted for inflation. You don't have to work that long to claim Social Security, but it can make a big difference in the size of your checks.
Those who work fewer than 35 years will have zero-income years factored into their calculation. Even one of these can reduce your monthly benefit by several dollars. And over decades, this could amount to hundreds or even thousands of dollars lost.
Working longer than 35 years often increases benefit amounts because people's income tends to increase over their careers. Once you've surpassed 35 years, some of your earlier, lower-earning years fall out of your benefit calculation and more recent, higher-earning years replace them, resulting in larger checks.
3. Delay benefits if it makes sense for you
The age you first apply for benefits has a substantial effect on the size of your checks. If you want the full benefit you've earned based on your work history, you must wait until your full retirement age (FRA) to apply. This is somewhere between 66 and 67, depending on your birth year.
Claiming benefits before your FRA shrinks your checks. Those who sign up right away at 62 get 25% smaller checks if their FRA is 66 or 30% smaller checks if their FRA is 67. To put this in perspective, if you qualify for the average $1,669 monthly check at your FRA of 67, you'd only get $1,169 per month by signing up at 62.
Your checks grow slightly for every month you delay benefits until you reach your maximum benefit at 70. This is 24% more than your benefit at your FRA if your FRA is 67 or 32% more if your FRA is 66. Delaying beyond this age won't increase your checks further, so you should definitely sign up by 70 at the latest.
Some people choose to sign up earlier, which can be wise if they don't expect to live long. Those with terminal illnesses or concerning personal or family health histories may prefer to sign up at 62 and claim benefits for as many years as possible before they die.
Those who aren't concerned about an early death often receive a larger lifetime Social Security benefit by delaying their application. Though you'll receive fewer years of checks, each will be larger.
But life expectancy isn't the only factor to consider when choosing a Social Security claiming age. You also need to weigh your financial situation and decide whether you can afford to delay. If you cannot put off claiming as long as you'd like, you could compromise and delay a few months or a year rather than signing up as soon as you become eligible.
If your goal is to get the most out of Social Security, the above tips are your best option. Take a few moments to think about how you might boost your income and decide when you plan to claim Social Security as well. Build this into your retirement plan and review your claiming strategy annually to ensure it's still right for you.
