If you want to maximize the income Social Security provides for you, there's one number you need to know: 35. Here's why this is the most important number in your retirement calculations.
Why is 35 key to getting the largest amount of Social Security benefits?
You need to know the number 35 because that's the minimum number of years you need to work in order to avoid shrinking your monthly Social Security check.
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See, benefits are based on your average wages in the 35 years when you earn the most money. The Social Security Administration adjusts your earnings over your career for inflation. Then, the SSA calculates your Average Indexed Monthly Earnings (AIME) over the 35 years when you had the highest earnings. And you get benefits equal to a percentage of that amount.
You still qualify for benefits by working much less than 35 years. Only a 10-year minimum work history is required to get Social Security checks. But regardless of how long you actually worked, benefits are always determined based on the 35-year formula. So, if you only worked for 10 years, you would have a whopping 25 years of $0 wages included when your average wage is calculated. Your benefits would be very low as a result.
Ideally, you should try to work beyond this 35 years, because chances are good there will be some times during your career when you don't make very much. If you make a very low starting salary in your first three years, for example, but have increased your income dramatically and you decide to work for 38 years, those three early years won't be included in your average wage. They'd be pushed out by higher-earning years later on.
But at a minimum, if you don't want $0s in your average, you should aim to put in a full 35 years before claiming benefits.
Why does this number matter more than others?
Your average wage is just one factor that determines how much your benefit will be. As mentioned above, your standard benefit equals a percentage of that average wage. But your standard benefit can be affected by when you file for checks to begin. You have a designated full retirement age (FRA), which is between ages 66 and 67, depending on your birth year. If you claim benefits before full retirement age, your standard benefit shrinks. If you claim benefits after FRA, your standard benefit increases.
Because of this, your full retirement age is important. But it's not as important as having a 35-year work history. If you claim benefits early, it's true your checks shrink -- but you receive more payments even though each is smaller. If you wait, your benefits do increase -- but you will not get as many checks. For years, the extra you get each month just goes to make up for the foregone income.
So while your claiming age matters, the program is specifically designed so if you don't outlive your life expectancy, you should just about break even whether you claim early or late. If you work for less than 35 years, though, this is always going to mean a smaller monthly and lifetime income than you would have had if you'd put in just a few extra years on the job to raise your average wage.
