The Social Security benefit you start out collecting in retirement won't be the same monthly benefit you're stuck with for life. That's because each year, Social Security benefits are subject to cost-of-living adjustments, or COLAs, that are designed to help seniors retain their buying power in the face of inflation.
Unfortunately, Social Security COLAs have fallen short in recent years, and going into 2021, seniors are looking at just a 1.3% boost. Ouch. But while Social Security raises haven't been substantial in recent years, the good thing is that there are steps you can take before signing up to score yourself a higher benefit to begin with. Here are four important ones.
1. Boost your earnings during your career
Your Social Security benefits are calculated based on your personal earnings history, so the more you're able to boost your income, the better. This means that if you're offered a promotion that involves just a modest salary bump for a lot more work, you may not want to turn it down, because in doing so, you'll not only short yourself on your near-term income, but you'll also deny yourself a higher Social Security benefit later in life. Furthermore, income you earn from a side job counts toward Social Security, so working a few night shifts on top of your main job could leave you with a higher benefit down the line.
2. Work at least 35 years
The Social Security Administration (SSA) will take your 35 most profitable years in the workforce into account when determining what your monthly retirement benefit looks like. But if you don't put in a full 35 years, you'll have a $0 factored in for each year you're missing an income. Rather than let that happen, aim to work a full 35 years, even if it means delaying retirement a bit. In doing so, you'll not only give your monthly benefit a chance to grow, but you might end up eking out some extra retirement savings, too.
3. Check your earnings statements for errors
Each year, the SSA issues an earnings statement summarizing your taxable income for the year. If that information is wrong -- say, it shows a lower income than what you actually made -- you could wind up with a lower benefit during retirement if you don't take steps to correct it. Therefore, make a point of reviewing your earnings statement each year, and if you see information that doesn't align with your records, contact the SSA to get it fixed. You'll get your annual earnings statement in the mail automatically beginning at age 60. Prior to that, you can access it on the SSA's website.
4. Delay your filing
You're entitled to your full monthly benefit based on your wage history once you reach full retirement age, which is either 66, 67, or somewhere in between. But you're allowed the opportunity to grow your benefits by 8% a year up until age 70 by waiting, so if you delay your filing past full retirement age, you'll score a large boost right off the bat. Of course, to do this, you may need to commit to keep working, but there are perks to holding down a job a few extra years -- namely, employer benefits and the paycheck you can use to pad your savings or pay off your mortgage before leaving the workforce for good.
While it's a good thing that Social Security benefits are subject to COLAs, the reality is that the best raise you can get is the one you give yourself. These moves could boost your Social Security benefits substantially so that even if COLAs remain stingy, you'll still be in line to collect a pretty nice chunk of cash during your senior years.