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3 Social Security Strategies to Bankroll Your Retirement

By Maurie Backman - Updated Apr 1, 2021 at 8:12AM

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These moves will help you score higher benefits -- and help your finances tremendously during your senior years.

Social Security may not be the only income source available to you during retirement, but it could end up being a substantial one, nonetheless. That's why it's important to approach your filing strategically and take steps to grow your benefits as much as you can. Here are a few moves that will score you a higher payout -- one that gives you more financial freedom during your senior years.

1. Give your earnings a boost

Your monthly Social Security benefit is unique to you. It's calculated based on your average monthly wage, adjusted for inflation, over your 35 highest-paid years in the workforce. If you manage to boost your earnings during your career, you could snag yourself a higher monthly benefit throughout retirement.

How do you supercharge your income? Growing your job skills to land promotions is one option, but so is picking up extra work on the side. Many people with side hustles don't realize that that income counts for Social Security purposes, as long as it's reported the way it should be to the IRS. If you earn $15,000 a year doing website design on the side, that income will count toward calculating your monthly retirement benefit.

Pen hovering over Social Security application form

Image source: Getty Images.

2. Delay your filing as long as possible

You've just learned that Social Security benefits are earnings-based. Another thing you should know is that you'll be entitled to collect your full monthly benefit based on your wage history once you reach full retirement age (FRA). Here's what FRA looks like, depending on when you were born:

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.

You might assume you have to sign up for benefits at your precise FRA, but you don't. Rather, you can opt to delay your filing beyond FRA and for each year you do, your benefits will increase 8% until you turn 70. The result? A higher permanent monthly paycheck for you.

3. Move to a state that doesn't tax benefits

If your earnings exceed a certain threshold, you'll face federal taxes on your Social Security benefits -- there's no getting around that. However, you can avoid state taxes on your benefits by not retiring in any state on this list:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Of course, just because these states tax Social Security income doesn't mean they're a poor choice for retirement. Some, in fact, offer a relatively low cost of living. But you should be aware that if you retire in any of these states, extra taxes on your benefits could come into play.

Getting more money out of Social Security doesn't just mean filing at the right age -- it also means working toward that goal throughout your career. The upside? If you play your cards right, you could end up with quite a generous payout from Social Security, and that could be just the thing that makes your retirement less stressful and more rewarding.

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