Social Security might seem like a straightforward program on its surface. Beneath that surface, the specific rules it follows means that nobody -- not even Social Security itself -- can tell you exactly what your benefit will be until you actually file to receive it. In addition to your earnings record, your age when you file plays a key role in determining exactly what your benefit will be.
Fortunately, while the specifics are tough to pin down, there are general principles you can follow to increase the size of your monthly benefit once you do collect. With that in mind, here are four Social Security secrets for getting even bigger checks.
No. 1: Delay filing until you're closer to age 70
You can start collecting Social Security retirement benefits as young as age 62. The longer you wait to start collecting up until age 70, the higher your monthly benefit check will be. The difference can be substantial.
As of January 2022, the average retiree receives $1,660.90 per month in benefits. Assume for a moment that you were born in 1960 or later and that amount represents your full retirement age projected benefit. By waiting until age 70, your monthly benefit could be as much as $2,059.52. On the flip side, if you collect at 62 -- the earliest age you can -- your benefit would be reduced to $1,162.63.
That's a major swing, determined entirely by your age when you start collecting checks. Of course, the trade-off is that the later you wait before collecting, the fewer months you will receive your benefit. Whether or not waiting is worth it to you depends on how long you expect you'll live, how well your health will hold out along the way, and how you'll cover your costs before you collect.
No. 2: Work a few more years
Social Security uses the highest adjusted 35 years in your earnings record to determine how large your benefit will be. If you work fewer than 35 years, then some years in your record will be $0. If you work more than 35 years, then your higher-income years will overwrite the lower-income ones, thus boosting your benefit. Especially if your late-career salary is higher than your early career salary was, those extra few years of higher earnings can make a significant difference in your total benefit amount.
In addition to the Social Security boost, those earnings can help you increase the amount of money you have saved for retirement. Plus, by working a few more years, your nest egg won't have to cover your costs for as long, which can improve its ability to cover your costs in your golden years.
No. 3: Earn a bit more
The more you earn each year (up to a cap, which is $147,000 for 2022), the higher the benefit you'll qualify for. If you're eligible for overtime at your job, that might be a good source of higher earnings. Otherwise, a side gig could increase your income as well. Alternatively, the Great Resignation is a real thing these days -- and many people quitting their jobs are doing so to seek out higher incomes at other employers.
Note that there's not a direct dollar-for-dollar link between what you earn from work and what your benefit will be. Social Security uses bend points in its formula. Those bend points mean that at higher income levels, you'll see a slower increase in the benefit you receive for the next dollar you earn than you would at lower income levels. Still, every little bit helps, and in addition to the higher Social Security benefit, the higher the income you earn, the better your opportunity to save some of it as well.
No. 4: Keep your other income sources down in retirement
This one isn't about receiving larger Social Security checks as much as it's about making sure you're able to keep as much of what you do receive as you can. One way this matters is that your Social Security benefit itself might be taxable, depending on your total earnings amount.
As much as 85% of your Social Security benefit can be taxed if:
- You're married filing separately,
- You're single and have a combined income above $34,000, or
- You're married filing jointly and have a combined income above $44,000.
That combined income number considers your adjusted gross income, your non-taxable interest income, and half your Social Security benefit.
Another way it matters is because your Medicare Part B premiums are based on your income level from two years prior. In 2022, the standard Medicare Part B premium is $170.10 per month, but it can increase to as much as $578.30 per month depending on your 2020 income level.
People who receive both Social Security and Medicare benefits typically have their Medicare Part B premiums deducted from their Social Security benefits. As a result, keeping your income down enough to stay out of the higher Medicare Part B premium levels can go a long way toward protecting what you keep from your Social Security benefit.
Put your plans in place today
While all four of these strategies can help you earn or keep a higher benefit check, they each require some pre-planning to execute successfully. So get started now, and put your plans in place today to maximize the value of your available Social Security benefit.