These days, the general convention is that it's a good idea to close out your career with 10 to 12 times your ending salary on hand in a dedicated retirement plan. That sum should do a good job of helping you cover your senior living expenses.
But let's face it -- that's a lofty goal. If you're earning $150,000 a year at the end of your career, that means you'd need a nest egg worth $1.5 million to $1.8 million to hit that target. That's doable if you managed to start saving for retirement from an early age. But if you didn't begin funding your 401(k) or IRA until your 40s or 50s, and you haven't been maxing out your contributions, then you could end up falling way short of that goal.
The good news, though, is that you're not necessarily doomed to a cash-strapped retirement if your nest egg isn't as robust as you might've hoped. In fact, one strategic Social Security move on your part could help compensate for a savings balance that isn't up to snuff.
Boost your benefits for life
The monthly Social Security benefit you're entitled to during retirement will be calculated based on your average monthly wages, adjusted for inflation, during your 35 highest-paid years in the workforce. But the age you file for benefits at will also influence how much you get paid from Social Security.
You're entitled to your full monthly Social Security benefit based on your wage history once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in between, depending on your year of birth.
Now you're allowed to sign up for Social Security as early as age 62. But claiming benefits ahead of FRA will shrink them in the process.
On the flipside, delaying your filing past FRA will result in a significant boost to your benefits -- one that you'll get to enjoy for the rest of your life. And so if you're short on retirement savings, waiting as long as possible to claim Social Security is a good bet.
Specifically, that means waiting until your 70th birthday to sign up for benefits. If your FRA is 67 but you delay your filing until age 70, your Social Security income will increase by 24%. Or, to put it another way, a monthly benefit of $2,000 at age 67 could become $2,480 after a three-year delay in filing. That's an extra $5,760 a year of income.
A great way to compensate
If you're nearing retirement and aren't happy with your nest egg, you can't go back in time and change your saving and investing strategy. But one thing you can do is delay your Social Security filing up until age 70. While there's no financial benefit to postponing your claim beyond that point, signing up for benefits at age 70 is a great way to compensate for a lower savings balance than you'd like -- and a great way to avoid financial stress throughout your senior years.