This article was updated on April 7, 2018, and originally published on June 10, 2017.
Whether you realize it or not, Social Security is a critical program for a majority of our nation's retirees. What was designed by the federal government to be a supplemental income program in the 1930s has turned into a social program that slightly more than 60% of seniors rely on for at least half of their monthly income.
According to a study conducted by the Center on Budget and Policy Priorities, without Social Security income, the estimated poverty rate among seniors would be expected to spike above 40%. With Social Security income, the senior poverty rate is less than 9%.
Eight ways to boost your Social Security check
Yet in spite of its importance, Americans' understanding of Social Security, and most importantly how to increase their eventual payouts, is subpar at best. Today, we're going to look at eight ways you can increase your Social Security benefit during retirement. While not all of these pathways may apply to you, there's bound to be a nugget or two of wisdom that could help you maximize your Social Security income.
1. Work in a high-paying field/job
The Social Security Administration (SSA) takes three things into account when calculating your benefit. This first factor of interest is your average earnings history. In other words, the more you earn, the bigger your payout, up to a certain point. The maximum monthly benefit payable under Social Security is $2,788 as of 2018, and this figure tends to somewhat correlate with inflation. If you work in a high-demand industry and land a well-paying job, or go to school to learn an in-demand skill, you'll be setting yourself up for a solid monthly check come retirement.
2. Work for longer than 35 years
The second factor that the SSA considers when calculating your Social Security benefit is your length of work history. The SSA averages your 35 highest-earning years when calculating your monthly payout, which on the surface means you should work at least 35 years if you don't want $0's averaged in for each year less of 35 that you worked.
But it's generally not a bad idea to consider working well beyond 35 years. Chances are you lacked the skill set necessary to garner a high wage in your teens or early 20s. By your 60s you'll likely have plenty of work experience, which could translate to a higher annual wage even after adjusting for inflation and lift your overall earning average over your 35 highest-earning years.
3. Wait to claim benefits for as long as economically feasible
Arguably the most important consideration is the age that you claim Social Security benefits. Qualifying seniors (those who've earned at least 40 lifetime work credits) are allowed to begin taking benefits at age 62, or any age thereafter. However, the SSA dangles a pretty tasty carrot if you hold off on enrolling for benefits. For each year you wait, your monthly benefit grows by approximately 8%, up until age 70. This means an individual claiming at age 70 can earn up to 76% more than an individual claiming at age 62 with an identical work history and earnings history.
Also critical to know is your full retirement age (FRA), or the age at which the SSA deems you eligible to receive 100% of your monthly benefit. It's determined by your birth year, with the newest retirees (in 2018) who were born in 1956 having an FRA of 66 years and four months. If you claim before this age, your benefit will be permanently reduced for life. If you wait until after this age, you can net an even larger monthly check.
4. Consider a Social Security do-over
Another option to consider, especially for baby boomers with poor saving habits, is a "do-over" known as Form SSA-521 – officially, the "Request for Withdrawal of Application." If you've regretted your decision to take Social Security benefits early (and 60% of seniors do file for benefits between ages 62 and 64, ensuring they receive a permanent reduction in their monthly payout), Form SSA-521 may allow you the opportunity to undo your filing.
The two catches? First you'll have to file Form SSA-521 no later than 12 months after you begin receiving benefits. The other important component is you'll need to pay back every cent in benefits you, and other people receiving Social Security income based on your work history, have received. Doing so will allow your filing to be undone, restoring your benefits to their previous growth of roughly 8% per year.
5. Weigh your survivor benefit option
While your Social Security claiming decision could rightly be viewed as one of the biggest personal decisions you'll ever make, if you're married or have young children it could be an entirely different story. Your decision on when to take benefits could impact what your spouse or younger children receive in survivor benefits.
For example, on average women have a lower monthly payout than men from Social Security. That's because more women than men choose to stay home and raise their children, as well as provide caregiving services to sick friends and relatives. This adversely affects their income, which reduces their Social Security benefit. But if their higher-earning spouse passes away, they'll have the opportunity to trade their benefit based on their own work history for the survivor benefit based on their deceased spouse's work history, assuming the survivor benefit is higher.
6. Use your ex-spouse to boost your benefit
If you're now divorced from your spouse, but you were married for at least 10 years, and you're still unmarried and of Social Security claiming age (at least 62), you may be able to claim spousal benefits based on your former spouse's earnings history. Best of all, it won't have any impact on what your ex-spouse receives on a monthly basis.
As with the survivor benefit, to qualify for the ex-spouse option, your benefit based on your work history would have to be lower than what you'd receive by claiming spousal benefits from your ex-spouse.
7. Consider tax benefits and where you retire
Retirees should also pay close attention to tax benefits and where they retire.
One little-known fact about Social Security is that your benefits may indeed be subject to federal taxation, as well as state taxation. Individuals earning more than $25,000 annually, and couples filing jointly with more than $32,000 in income, can have at least half of their Social Security income exposed to federal taxation. The use of a Roth IRA, which grows tax-free for life and won't count toward your annual adjusted gross income regardless how much you withdraw, can be useful in keeping your income below these federal tax thresholds in retirement.
However, 13 states also tax Social Security benefits. Should you choose to live in a state that taxes Social Security benefits, you may be required to hand over some of your benefit. If you want to keep as much of your Social Security income as possible, you'll want to pay close attention to where you retire.
8. Check your Social Security earnings statement
Last, but not least, make a habit of double-checking your Social Security earnings statements. If the SSA has your earnings history incorrect, it could adversely affect what you're paid once you file for benefits – and it's a lot harder to fix those errors after you begin receiving a monthly benefit check.
The good news is that staying on top of your personal Social Security information is easier than ever. Nearly all of this info can be found via a My Social Security account. Get in the habit of inspecting your earnings history once annually to ensure it's accurate.