It turns out one of the best retirement tools out there has likely been under your nose the entire time.

Saving for retirement is hard, and most soon-to-be-retirees aren't prepared enough. The average retirement costs upwards of $738,000, according to the 2017 Merrill Lynch Finances in Retirement Survey, and nearly half of baby boomers have nothing saved for retirement, per Insured Retirement Institute estimates.

Large pile of hundred dollar bills

Image source: Getty Images

Fortunately, even if your savings aren't quite where you want them to be, there's still a near-guaranteed way to maximize your retirement income: Social Security. Researchers at the Stanford Center on Longevity found that Social Security benefits are one of the best ways to stretch your retirement income, not least because they're adjusted for inflation and you'll receive them for the rest of your life. 

Making the most of Social Security

An added bonus of Social Security benefits is that they're flexible: You're can start receiving them as early as age 62, or you can delay them up until age 70 if you want bigger checks. Claiming benefits once you reach your full retirement age (which is 65 to 67 depending on the year you were born) will earn you your full benefit amount. But claim before that and you'll receive more -- but smaller -- checks. Delay claiming until you're past your full retirement age, and you'll receive a boost in benefits each month to make up for the years you weren't receiving Social Security checks.

If you're struggling to save for retirement on your own and you expect to depend on Social Security for much of your income, then it's wise to wait as long as you can to start claiming benefits.

For example, say your full benefit amount is $1,400 per month. Let's also say your full retirement age is 67 years. If you claim benefits early at 62, your checks will be cut by 30% -- leaving you with just $980 per month. However, if you delay benefits and wait until age 70 to file, you'll receive 124% of your monthly benefit -- or $1,736 per month.

A couple hundred dollars per month may not seem like a huge difference, but it adds up over time. That $980 per month translates to around $11,760 per year, while $1,736 amounts to $20,832 per year. Here's what your lifetime benefits would look like if you claim at 62 versus age 70:

Age Lifetime Benefits When Claiming at 62 Lifetime Benefits When Claiming at 70
62 $11,760 $0
70 $94,080 $20,832
75 $152,880 $104,160
80 $211,680 $208,320
85 $270,480 $312,480
90 $329,280 $416,640

Of course, nobody knows exactly how long they'll live, so it's impossible to know whether you'll come out ahead by delaying benefits or if you're better off claiming early. But with life expectancies on the rise -- one in four 65-year-olds can expect to live past age 90, according to the Social Security Administration, and one in 10 make it past 95 -- delaying benefits can add an extra cushion if you outlive your independent savings.

Granted, not everyone can wait until age 70 to start claiming benefits. Maybe you were forced to retire early because of health reasons or job loss, and you need Social Security to get by. But if you have the choice to either claim early or delay, and your savings are lacking, then it's a good idea to wait a few years and make the most of these benefits.

Social Security isn't a magic potion

While Social Security benefits can help boost your retirement income and add a cushion to your savings, you shouldn't rely on them completely to make ends meet. The average beneficiary receives around $1,413 per month, which amounts to just under $17,000 per year. That's not a lot to live on if you're going to be completely dependent on Social Security to pay your bills.

To further complicate matters, there's a chance that there will be cuts in Social Security in the relatively near future. According to the Social Security Board of Trustees, there's currently more cash flowing out of the system than is coming in -- partly as a result of the massive number of baby boomers retiring each day and partly because life expectancies are continuing to increase, depleting the program's cash reserves. And by 2034, Social Security's trust funds -- which are currently preventing the program from running a deficit -- will be exhausted. While that won't lead to a collapse of the entire system (after all, Social Security will continue to exist as long as employees continue to pay their taxes), but it may result in cuts in benefits of up to 23%. 

Of course, it's possible Congress will figure out a solution before 2034 to avoid this problem. However, it's better to be safe than sorry, and banking on the hope that it will all sort itself out by the time you retire is not the wisest decision. That's why it's still important to focus on your own savings outside of Social Security to strengthen your nest egg as much as possible.

To make the most of your benefits, it's important to be strategic about when you claim and not rely too much on Social Security to make ends meet. But when used wisely, Social Security is a huge asset that can maximize your retirement income when your savings are falling short.