You pay into Social Security your whole working life so that when you retire, you can enjoy a guaranteed stream of income. You don't get a say in how much you pay into Social Security, but you do have some control over how much you get out. Here are four smart strategies you can try to boost your monthly benefits and enjoy a more comfortable retirement.
1. Work at least 35 years
The Social Security Administration (SSA) calculates your benefits by looking at your average monthly income during your 35 highest-earning years, adjusted for inflation (by using a metric called AIME.) If you haven't worked at least 35 years, zeros are added into your calculation, which brings down the average considerably, resulting in a lower monthly benefit. And if you've worked less than 10 years, you won't be eligible for Social Security benefits at all.
If you intend to retire before you've worked 35 years, consider delaying your retirement long enough to have 35 years of income to show for your Social Security benefits. It doesn't hurt to work even longer if you can, since delaying benefits results in bigger checks later on. Also, chances are you'll earn more money late in your career than you did when you were just starting out. When you work more than 35 years, those early, lower-earning years drop off and are replaced by higher-earning years, and that means a bigger benefit check for you.
2. Increase your income
Your Social Security benefits are based on your income during your working life, so anything you do to increase your income today will boost your future Social Security benefits.
There are different ways to approach this. You could work overtime or pursue a promotion at your existing job, switch companies, or complete a higher education program to open up new doors. You could also start a side hustle or generate passive income through rental properties or royalties on creative works. Just make sure you report any money you're earning through side channels to the government. If you don't, it won't help your Social Security benefits, and you could put yourself at risk of a tax audit.
3. Choose the right age to start Social Security
You can sign up for Social Security as soon as you turn 62, but this isn't a good idea unless you cannot pay your bills without it or you don't anticipate living long.
You have to wait until your full retirement age (FRA) -- 66 or 67, depending on your birth year -- if you want your full benefit per check, and for every month that you claim benefits before this age, the SSA will shrink your benefit checks. Claiming at 62 means you'll receive only 70% of your scheduled benefit per check if your FRA is 67 or 75% if your FRA is 66. You can also delay benefits past your FRA, and your checks will increase until you reach the maximum benefit at 70. This is 124% of your scheduled benefit for those with an FRA of 67 and 132% for those with an FRA of 66.
It's up to you to decide when you want to begin. If you haven't already, create a my Social Security account to estimate your monthly benefit at different ages based on your current work record. Multiply these amounts by 12 to get your estimated annual benefit and then by the number of years you expect to receive benefits to figure out your estimated lifetime benefit.
For example, if you receive a $1,000 monthly check at FRA and you receive benefits for 20 years, your lifetime benefit would be $240,000 ($1,000 x 12 x 20). It's usually best to delay benefits if you expect to live a long life, but you should never delay them past 70, because your checks won't increase any more after this point.
4. Coordinate with your spouse
If one spouse earns significantly more than the other, consider having the lower-earning spouse start Social Security at 62, while the higher earner delays benefits until 70, when they'll get a larger check. Then, if the lower earner would be entitled to a larger benefit based on their spouse's work record than on their own, the SSA will automatically switch them over to the spousal benefit when the higher earner applies for Social Security.
You could employ a similar strategy if both spouses make a similar amount, though the total lifetime benefits may not be significantly different than if both spouses took Social Security at FRA. In this scenario, it may be best for both spouses to delay benefits as long as possible.
Sit down with your spouse and use the data from your my Social Security accounts to estimate how much you can each expect to receive, and talk about when each of you plans to begin claiming Social Security. Compare different scenarios until you find the one that offers the greatest lifetime benefits for the two of you.
You're never too young to start thinking about Social Security, and the sooner you do, the more you can control how much you receive in benefits. Try the four simple tips above and see what a difference they can make for you.