There's talk in Washington of changing Social Security, and that has many people worried. After all, close to 61 million Americans depend on Social Security for income in retirement -- the program pays out $918 billion in benefits annually.
Fortunately, Social Security is still here and intact -- and if you make some smart moves, you can maximize the benefits you get from the program.
Here are six ways you might get more benefits from Social Security:
- Fix any errors on your record. If the Social Security Administration's record of your earnings has any errors, you may receive less in benefits than you're due. The formula that the Social Security Administration uses to determine your benefits is based on your income in the 35 years in which you earned the most. (The earnings are adjusted for inflation, to account for how salaries tend to rise over time, while purchasing power shrinks.) If any of those years' earnings are wrong -- or, worse, missing -- your benefits will be undeservedly smaller. You can look up the record of your income and taxes paid into the Social Security system anytime at the SSA website. Do so now and then to make sure everything looks correct. You can also see estimates of your future benefits, there, which can be helpful for retirement planning.
- Work for at least 35 years. Keeping in mind that the Social Security benefits-determining formula is based on 35 years' of earnings, understand that if you only earned income in 30 years, the formula will factor in five zeros. That will leave you with benefits that are smaller than they could have been. If you're planning to retire after, say, 32 years of work, you might consider working up to three more years, to boost your benefits.
- Earn more. This strategy is more achievable for some than others. Since the formula focuses on your 35 highest-earning years, you may be able to beef up your benefits by beefing up your earnings. You may be on the verge of retiring now, with 35 years of earnings under your belt, but if you're earning a lot more now, adjusted for inflation, than you did in previous years, you can increase your ultimate benefits by working a little longer so that some more higher-income years can be included in the calculations, replacing some lower-income years. Alternatively, you might be more aggressive asking for raises in your working life, or you might think more seriously about other job possibilities that might pay better. If you still have many working years ahead of you, a little more education or a new certification might boost your income now and your retirement income later.
- Delay starting to collect benefits. A simple way to make your Social Security benefits bigger is to delay starting to collect them. You can start collecting as early as age 62, and you can put off starting to collect until age 70. Each of us has a "full retirement age" (66 or 67 for most of us), and for every year beyond that that you delay, your benefits will grow by about 8%. Delay from age 67 to 70, and your benefits will be about 24% bigger -- enough to turn a $2,000 monthly benefit into a $2,480 one. That's a powerful strategy, but it only works well if you live a longer-than-average life. Social Security benefit calculations are actually designed so that those who live an average life span will collect roughly the same amount, in total, no matter when they start collecting benefits. (After all, delaying gives you fatter checks, but fewer of them.) If you think there's a decent chance that your life will be only average in length, or below average, this isn't the best strategy for you. Instead, start collecting benefits at your full retirement age -- or even at age 62.
- Collect spousal benefits. If your spouse has a richer work history than you do, you may be able to collect a "spousal benefit," based on your spouse's earnings instead of your own. Spouses can collect benefits worth up to 50% of their other half's benefits. This can be particularly welcome for spouses who never worked or who earned very little -- perhaps because they stayed home, raising children or caring for elderly parents.
- Delay your divorce. If you're divorcing after, say, 9 years of marriage, consider staying married until 10 years have passed -- if you can. Divorcees may be able to claim benefits based on their ex-spouse's earnings (even if that ex has remarried) if they were married for at least 10 years and if they themselves have not remarried.
There are many more strategies related to Social Security benefits than you may realize. Don't be afraid to tap the services of a professional financial advisor, either, as a good one might be able to steer you toward a benefit-maximizing strategy. Favor fee-only financial advisors, whom you can find via referrals from friends or at the website of the National Association of Personal Financial Advisors. Spend a little time learning and strategizing, and you could end up with thousands of dollars more each year in retirement.