The big Social Security news these days is the 2023 cost-of-living announcement (COLA). Though it won't officially be announced until October, it's expected to be the largest raise the program has seen in decades. But many don't realize that COLAs are just supposed to help your benefits keep pace with inflation.
If you want larger checks that will actually make a difference to your buying power, you should try the following four things.
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1. Work longer
You must earn 40 credits to qualify for Social Security -- in 2022, a credit is defined as $1,510 in income -- and you can earn a maximum of four credits per year. But working longer than this can boost your checks.
The Social Security Administration bases your benefit on your average monthly earnings, adjusted for inflation, over your 35 highest-earning years. This is known as your average indexed monthly earnings (AIME). Those who haven't worked that long have zero-income years factored into their benefit calculation. Even one of these can knock several dollars off your monthly checks.
Working at least 35 years will help you avoid this issue, and working even longer could help your Social Security benefit further. Once you have that 36th year of work in the books, the Social Security Administration drops your lowest-earning year from your benefit calculation. Since most people earn more later in their careers than when they first entered the workforce, working beyond 35 years often boosts your AIME and, by extension, your monthly benefit.
2. Increase your income
Since your Social Security checks are based on your income during your working years, anything that helps your paychecks today will likely help your benefit tomorrow. This includes securing a raise, finding better-paying employment, or operating a successful side business.
The only people this won't work for are those already earning $147,000 or more in 2022. That's the maximum income you pay Social Security taxes on this year, so anything beyond this won't help your benefits.
3. Consider delaying benefits if it makes sense
Though you can sign up as early as age 62, you're technically supposed to wait until your full retirement age (FRA) if you want to claim the full benefit you've earned based on your work history. This is somewhere between 66 and 67, depending on your birth year.
Signing up early shrinks your checks by up to 25% if your FRA is 66 or 30% if your FRA is 67. On the other hand, delaying benefits increases your checks. You can get an extra 24% by waiting until 70 -- when you qualify for your maximum benefit if your FRA is 67 -- or an extra 32% if your FRA is 66.
Choosing the right age to sign up is key to maximizing your benefit checks. Usually, those with shorter life expectancies are better off signing up early, while those who believe they'll live into their 80s or beyond receive more by signing up later. But you also have to weigh your financial situation. There's no sense in delaying benefits if you'd have to take on debt to pay your bills in the meantime.
4. Suspend benefits or withdraw your application if you're already claiming
The above tips won't work for you if you're already claiming Social Security, but there's still a way to boost your checks if you don't need your benefit right now. Once you reach your FRA, you can suspend your Social Security checks. The government will stop sending them to you until you either turn 70 or request they begin again. In the meantime, you'll accumulate delayed retirement credits that will lead to larger benefits in the future.
If it's been less than one year since you applied for Social Security, you're eligible to withdraw your Social Security application. If you do this, the government will treat you as if you never claimed, and your checks will continue to grow for every month you delay. But there are a few catches.
First, withdrawing your Social Security application is a one-time deal. Once you apply for a second time, you can't undo your decision. Second, you must pay back all the benefits you and anyone else claiming on your work record has received thus far. If your spouse is claiming spousal benefits on your work record, you also need their permission in writing.
If you cannot meet these requirements, hold on until your FRA and suspend benefits as discussed.
The sooner you begin thinking about your Social Security benefits, the better position you'll be in to make real changes to your checks. Even if you're decades away from claiming, it's best to start working out a strategy now. You can always adjust it if your plans change later.
