There's a good chance Social Security will play an important role in your retirement. Maybe you'll use those benefits to pay for basics like housing and healthcare. Or maybe those benefits will serve as your travel money, allowing you to visit the places you've always dreamed of. No matter what you plan to use your Social Security income for, it's a good idea to score the highest monthly paycheck possible. These moves will help you do just that.
1. Delay benefits until age 70
Your monthly Social Security benefit is calculated based on your personal earnings history. You're entitled to that payment in full once you reach full retirement age, or FRA. Consult this table to see what your FRA looks like:
|
Year of Birth |
Full Retirement Age |
|---|---|
|
1943-1954 |
66 |
|
1955 |
66 and 2 months |
|
1956 |
66 and 4 months |
|
1957 |
66 and 6 months |
|
1958 |
66 and 8 months |
|
1959 |
66 and 10 months |
|
1960 or later |
67 |
Data source: Social Security Administration.
If you delay your Social Security filing past FRA, your benefits will increase by 8% a year. That raise is not only guaranteed, but it's also permanent, which means that if you wind up living a long life, you'll come out way ahead financially by delaying your filing rather than signing up for benefits on time. The only catch is that you can't delay your benefits indefinitely. Once you turn 70, the delayed retirement credits that boost your benefits stop accruing. If you can hold out until 70, you may be pleasantly surprised at how high your monthly paycheck turns out.
Image source: Getty Images.
2. Work a full 35 years
Your Social Security benefits are based on your average monthly wage, adjusted for inflation, during your 35 highest-paid years on the job. This means that if you don't work a full 35 years, you'll have a $0 factored in for each year you're missing an income. That could, in turn, drag your benefit down. If you're gearing up to retire but realize you're shy a few years in your work history, push yourself to extend your career. It could give you quite the long-term income boost.
3. Work longer if your earnings peak late
Though earlier earnings are, as mentioned, adjusted to account for inflation when calculating your monthly Social Security benefit, your late-career earnings are apt to be substantially higher than what you were making 10, 20, or 30 years prior. In fact, if you're on the cusp of retirement, but your earnings recently jumped -- say, you finally got the promotion you'd been after for years -- then it could pay to work a bit longer. In doing so, you could replace a year or two of much lower earnings with a higher income that raises your benefit overall.
4. Move to a state that doesn't tax Social Security
There are 13 states that tax Social Security benefits to varying degrees:
- Colorado
- Connecticut
- Kansas
- Minnesota
- Missouri
- Montana
- Nebraska
- New Mexico
- North Dakota
- Rhode Island
- Utah
- Vermont
- West Virginia
You may have certain reasons for retiring in one of these states -- great scenery, proximity to family, or a reasonable cost of living. But if your goal is to snag the highest monthly Social Security benefit possible, then you may want to avoid these states and move someplace that won't take a cut.
It pays to be as strategic as you can when it comes to Social Security. Make the above moves, and you could wind up with a much more generous paycheck that's yours to enjoy every month for the rest of your life.
