The income that Social Security provides in retirement is crucial for a huge number of Americans. In many cases, Social Security is the only reliable source of income, while even for those fortunate enough to have pensions, savings, or side gigs to provide some extra cash, Social Security is still a key financial support.
The typical retired worker receives a bit over $1,550 per month in Social Security benefits. For someone becoming eligible for benefits in 2021 at age 62, it takes average earnings of about $70,000 a year -- indexed for inflation over a 30-year career -- to generate that monthly benefit. However, if you're still working and you'd like to boost your retirement benefit by $100 a month, there are three different ways you can make that happen. We'll go through all three.
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1. Boost your average earnings by about $500 a month
The formula for determining your monthly Social Security benefit looks at the average earnings you've received over the course of your career. The higher the average, the larger the check, although the incremental amount of additional benefits gets smaller as your wages go up. For every additional dollar of average monthly wage up to $996, you get an extra $0.90 in your baseline benefit at full retirement age. However, for an extra dollar when your average wage is between $996 and $6,002, you only get $0.32, and a boost above the $6,002 mark results in just a $0.15 benefit increase.
To get $1,650 in monthly benefits, you'd need to have average earnings of about $76,000. That's works out to about a $500 boost to your monthly income in order to get the $100 bump to your monthly Social Security check that you want.
2. Work an extra two and a half years
Social Security assumes that you work a 35-year career. If you have a shorter work history, it'll add in zeros to figure out your 35-year average monthly income.
By replacing some of those zeros with additional earnings, you can boost your average significantly. For instance, just by working and earning that same $70,000 salary for another two and a half years, you can boost your Social Security check by nearly $100 a month. Even if you can't get a job that pays as well, working a bit longer at lower wages can eventually get you to the same result.
3. Wait 11 months before claiming your benefits
Claiming early at age 62 results in getting smaller monthly checks than claiming at full retirement age. For those turning 62 in 2021, the reduction is nearly 30%. But each month that you wait means a smaller reduction from your regular full retirement age benefit.
In this case, by waiting until you're 62 and 11 months old, you can receive roughly $100 more. That means finding a way to do without Social Security for nearly a year, but your payments will be permanently higher for the rest of your life.
Get what you can
In practice, many people trying to plan for Social Security use a combination of these strategies to make their checks a little bigger. You might not be able to do all three, but knowing that earning more, working longer, and waiting before claiming benefits can all help boost the size of your Social Security payment is useful and can help you make the best choices possible with your benefits.
