"Money never made a man happy yet, nor will it. There is nothing in its nature to produce happiness. The more a man has, the more he wants. Instead of filling a vacuum, it makes one."
-- Benjamin Franklin
Ben Franklin has a point, but it's also true that many of us simply need more money, at least for our retirement, and not just to make us happy. More than ever, most of us need to rely on ourselves to build up a war chest for retirement, as Social Security isn't likely to provide all the income we need.
Social Security is a major income source for most retirees, designed to replace about 40% of the average worker's pre-retirement income (and less than that for those with above-average earnings). The average monthly Social Security retirement benefit was recently $1,366, which amounts to $16,392 per year. If your earnings have been above average, you'll collect more than that -- up to a recent maximum monthly Social Security benefit of $2,687 for those retiring at their full retirement age. That's still only about $32,000 for the whole year.
How might you get as much as possible out of the Social Security program? Well, here are 11 strategies to consider.
- Work for 35 years. The formula that the Social Security Administration (SSA) uses to compute your benefits is based on your earnings in the 35 years in which you earned the most. If you earned income in only 28 years, the formula will be incorporating seven zeros, which will shrink your benefits to some degree. Are you planning to retire after 33 years of work? It might be worth it to work two more years, if you want to get more benefits.
- Work for more than 35 years. Remember that the formula for your benefits is based on your 35 highest-earning years, adjusting for inflation. Thus, if you're bringing in a lot more as you approach retirement than you did when you were young (again, adjusting for inflation), if you work 37 years, two high-earnings years will kick out two low-earning years, resulting in bigger checks.
- Earn more. This is easier said than done, but if you want bigger Social Security checks in your future and you have the ability to move into jobs that pay better, do so -- perhaps by changing your career or getting an additional degree or certification or two.
- Check your record. You can look up the SSA's record of your income and taxes paid into the Social Security system anytime, and see estimates of your future benefits, at the SSA.gov website. It's worth an occasional visit to make sure your earnings and taxes paid are correct. If they're not, you might end up receiving smaller benefit checks than you've actually earned. Get them corrected, and voila -- increased benefits!
- Delay collecting. A simple way to make your Social Security benefits bigger, and potentially a lot bigger, is to delay starting to collect them. You can start as early as age 62 and delay up to age 70. Each of us has a "full" retirement age (typically 66 or 67 these days) and for every year beyond that for which you delay, your benefits will grow by about 8%. Delay from age 67 to 70, and you'll get benefits 24% bigger, enough to turn a $2,000 benefit check into a $2,480 one.
- Start collecting at 62. If you live an average life span, though, you won't come out ahead much by delaying, because you'll get fewer checks, in total, than will those who started earlier with smaller checks. If you live much longer than average, though, waiting for bigger checks will have been worth it. We don't know how long we'll live, though. If you think you have a decent chance of living an average-length life or a shorter-than-average life, or you simply need the money, go ahead and start collecting early. You may get more total benefits that way than if you waited for bigger checks.
- Collect a spousal benefit. If your spouse has earned more than you in his or her working life, you may be able to collect a "spousal benefit," based on your spouse's earnings and not 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 earned very little.
- Don't earn too much if you're working in retirement. If you're planning to start collecting benefits before your full retirement age and you want to work some then, too, be careful -- because after a certain point, your benefits may be reduced. The SSA explains: "If you're younger than full retirement age during all of 2017, we must deduct $1 from your benefits for each $2 you earn above $16,920." The year you reach your full retirement age, the earning limit jumps to $44,880, and the penalty decreases to $1 withheld for every $3 earned above the limit.
- Go ahead and work in retirement. The previous warning is true, but there's a catch: The dollars that are withheld don't disappear. They're factored into your future benefits. So this is another way of increasing your benefits -- though it's not the most meaningful way. Still, it's good to know that if you need or want to work in retirement, there will be an upside beyond the paychecks you receive.
- Delay your divorce if need be. Another way to get bigger Social Security benefits is to collect benefits based on your ex's earning history, if he or she earned more in their working life. You need to follow the rules, though. Divorcees may be able to claim benefits based on their ex-spouse's earnings -- even if that ex has remarried -- if the couple was married for at least 10 years. There are a few more rules related to this, so look into them if this might apply to you.
- Look into survivor and disability benefits, too. Social Security isn't just about retirement. There are survivor and disability benefits available, too, as well as retirement benefits for dependents of retirees in some cases. If your spouse passes away, you may be able to claim survivor benefits -- and your children may receive them, too, through age 17. Social Security also offers disability benefits, to people of all ages who qualify.
There are many more strategies related to Social Security benefits than you may realize -- especially if you're part of a couple. For example, if you've earned a lot less over your working life than your spouse has, your spouse's benefit checks are likely to be larger. The two of you might, if possible, start collecting your checks early while delaying collecting your spouse's checks, so that they can grow larger. Eventually, when one of you dies, the surviving spouse will get to collect the larger benefit checks.
Consider consulting a professional financial advisor, too, as a good one might be able to steer you toward a benefit-maximizing strategy. Favor fee-only financial advisors, whom you can find through referrals from friends or at the website of the National Association of Personal Financial Advisors.