More than 60% of all American seniors rely on Social Security for at least half of their income, and around a third of them depend on Social Security for at least 90% of their income. That makes Social Security an incredibly important part of nearly all Americans' retirement plans.
Social Security benefits are based on a formula that considers your age when you collect, the number of years you worked, and the income you earned during those working years. That formula makes it possible for you to figure out ways to increase your monthly Social Security benefit, with the three listed below already proven to help you do exactly that.
1. Work more years
Social Security considers your 35 highest earning years when setting your benefit level. If you worked fewer than 35 years, those non-working years count as $0. Working longer can replace both $0 earning years and lower income years with a much better wage base for calculating your benefits.
You might benefit from this approach if you took a few years off to care for your children or parents, or if you climbed the corporate ladder and can command substantially more near the end of your career than you did at the beginning of it. In any event, you'll certainly need to keep working to be able to put more years on your Social Security record.
2. Claim later in life
You can claim your Social Security retirement benefit as early as age 62, but the longer you wait between ages 62 and 70, the higher your monthly benefit will be. The rate at which your benefits increase by waiting depends on the year you were born and whether you're above or below your full retirement age. Social Security has a chart (see this link) that will help you calculate the specific benefit increase you'll receive for waiting longer to collect.
To benefit from this approach, you need to have another way to cover your costs. Whether you're still working, have savings or a pension, or are getting residuals like cash from the installment sale of business you used to own, you'll need some way to pay your bills until you start collecting. After all, it makes no sense to dig yourself into debt just to collect a larger Social Security check a few years down the road.
3. Earn more each year
The Social Security formula considers your salary or other earnings from work, up to a limit that can change each year based on the national average wage index. In 2017, that limit is $127,200. If you're earning less than that amount, a higher working income will help you increase your Social Security benefit when it comes time to collect.
If you're eligible for overtime, that's one way to both pick up some extra cash and increase your Social Security benefits. If you're part-time and can work some extra hours, that would be useful as well. For salaried folks, over the long run, raises and potential bonuses can help you increase your earnings, but over the short run, there's nothing wrong with picking up a second job to boost your income.
Remember, too, that any extra income you pick up above and beyond what you need to live is money you can invest toward your future. Over time, that can turn into a decent nest egg to increase your retirement income above and beyond the increased Social Security benefit.
Let Social Security play its role in your retirement plan
While you can use those three proven ways to increase your Social Security benefit, it's important to note that Social Security will only replace around 40% of the typical retiree's income. That percentage actually decreases for higher-income earners, and even Social Security itself encourages people to have another source of retirement cash available to them.
Indeed, the typical retiree's Social Security payment is currently around $1,363 per month. While you can leverage these methods to improve your chances of adding a bit to your monthly payment, the reality is that Social Security primarily serves as a guard against abject poverty in old age.
As you're figuring out ways to put in more years of work, delay collecting until later and earn more each year. Take some of that extra money you'll be earning along the way and set it aside for your future. Let that money compound for you between now and when you do retire and start collecting your Social Security. That money, combined with the increased Social Security benefit you can get by following these three methods, can help you get all that much closer to a truly comfortable retirement.