You want to enjoy your retirement -- and that means having enough money to do the things you love. While you can't live on Social Security alone, it probably will provide a lot of your income, so you want to maximize the benefits you'll receive.
Fortunately, there are steps you can take to try to boost your benefits so that your Social Security checks are as big as possible. Many of the most effective approaches to increase benefits need to be acted upon before retirement, so follow these tips as early as possible if you want to make the most of Social Security.
1. Understand how benefits work
You can't make smart choices about claiming Social Security if you don't know what factors affect your benefit amount. Some of the key things to know include:
- How your age at retirement affects your benefits.
- How your work history affects how much income you receive.
- Whether you can claim benefits on someone else's work record.
If you're uncertain about the best Social Security claiming strategy, talking to a financial professional is a wise move. While it may cost you a little money, it could pay off if you receive higher income the rest of your life.
You should always get advice before you claim benefits if you're not certain which approach is best, because it's hard to go back once you've chosen the wrong Social Security claiming strategy. In fact, if you change your mind within 12 months, you can undo your claim only if you pay back the benefits you've already received. And if you change your mind after a year of receiving benefits, it may be too late.
2. Work a little longer
Working longer is one of the best ways to increase benefits for a few reasons.
First and foremost, working could allow you to delay claiming Social Security benefits. Waiting to claim until full retirement age (FRA) means you'll get the full benefit due, rather than the reduced benefit that results from retiring early. And working longer means you earn delayed retirement credits up until age 70, which result in your benefits rising for each additional month you work after FRA.
Working longer is also helpful in increasing benefits under the formula the Social Security Administration uses to determine your benefit amount. It calculates benefits based on your average income (adjusted for inflation) over the 35 years when you earned the most.
If you haven't worked 35 years, working longer means you'll get rid of years when $0 in earnings are factored in. And, if you've worked 35 years but made less at the beginning of your career, working longer allows you to replace a year of low earnings with a year of high ones. This makes a big difference in total benefits.
3. Maximize your income
Because your Social Security benefits are based on your highest 35 years of earnings, boosting what you make means you'll receive higher monthly benefits. While increasing your income can be difficult, there are ways to make your paychecks bigger.
Negotiating your salary and asking for regular raises ensures you're earning the maximum. Working a side gig also means more money coming in -- which is helpful because it will increase Social Security benefits and will give you more to save to supplement Social Security.
The more years when you're a high earner, the more you maximize your Social Security. So start looking for opportunities today.
4. Choose the best time to claim your benefits
Claiming benefits later in life means monthly income will be higher because you earn delayed retirement credits. But you'll miss out on years of receiving Social Security while you wait to claim.
You can break even from years of missed benefits if you live long enough, but not everyone will. That's why it's important to consider your individual situation when you decide whether to wait in order to maximize your benefits, or claim ASAP and start the income flowing.
To determine when you'll break even from years of missed benefits:
- Figure out what your reduced benefit will be if you retire early.
- Multiply that by the number of months you'll wait to claim to find out how much money you miss out on by delaying.
- Figure out how much higher your benefits will be due to the delay.
- Divide the money you miss out on by the extra monthly benefit to find out how long you'd need to live to break even.
If you miss out on $58,000 in benefits by retiring at 67 instead of 62 but your benefit is $5,000 per year higher, you'd divide $58,000 by $5,000 to find you'd break even in 11.6 years. If you live to be 78.6 years old, you'd get the same amount of benefits as if you had claimed at 62 -- and if you live longer, you'll get more money.
While it's hard to predict how long you'll live, your current health status and your family's medical history can help you make an educated guess.
5. Find out if you can claim on someone else's work record
You might be able to earn more Social Security income if you claim on a spouse's work record.
You're entitled to spousal benefits if you are married, or are divorced but were married for 10 years or more. You're entitled to survivor benefits if your spouse has died.
Figuring out how to claim spousal benefits is complicated, but this guide can help. Make certain to work with your spouse to maximize money you both have coming in by strategically deciding who will claim benefits when, and under which work record. A financial adviser can help.
Maximizing your Social Security benefits is worth it
Once you start claiming Social Security, you'll have guaranteed income for the rest of your life. It makes sense to maximize these benefits so you'll have the largest monthly checks possible and will have more money to enjoy in retirement.