Nearly nine in 10 retired workers depend on Social Security benefits to make ends meet, but living on a fixed income is no easy task. Fortunately, the size of your Social Security check depends on two things -- lifetime earnings and the age at which you claim benefits -- both of which are in your control, at least to some extent.
Here are four ways future retirees and non-working spouses can maximize their Social Security retirement benefits.
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1. Work for at least 35 years
The equation used to calculate your Social Security benefit can be broken into two parts. First, the earnings from your 35 highest-paid years in the workforce are indexed (i.e., adjusted to accounted-for changes in general wage levels) and averaged. Second, a formula is applied to those average indexed earnings to determine your primary insurance amount (PIA). You can think of your PIA as your full Social Security benefit.
That means the first way to maximize your Social Security check is to stay in the workforce for at least 35 years. If you work fewer than 35 years, a zero will be used in the PIA equation for each missing year, resulting in a lower benefit.
2. Make as much money as possible
The second way to maximize your Social Security benefit is to earn as much as possible during your 35 highest-paid years. Of course, that is easier said than done, but you could supplement your primary employment with a part-time job to generate extra income, especially if you have a monetizable hobby. Or, at the very least, you can avoid dialing back to part-time employment in the years leading up to retirement.
3. Delay Social Security benefits until age 70
You are eligible to receive Social Security benefits at age 62, but you are not eligible for your PIA until you reach full retirement age (FRA). If you claim Social Security before FRA, your benefit will be permanently reduced based on how many months early you get your first check. This calculator from the Social Security Administration can provide an exact percentage.
On the bright side, the system works the same in reverse. If you claim Social Security after FRA, your benefit will be permanently increased by 8% per year up to age 70. That means a third way to maximize your Social Security check is to delay benefits until age 70.
4. Claim spousal benefits at full retirement age
The non-working spouse of a retired worker can also claim Social Security. The benefit paid to spouses can be up to half of the retired worker's PIA, but the actual amount depends on the spouse's age when they claim Social Security. To be eligible for spousal benefits, the individual's spouse must have claimed retirement benefits, and the individual must be (1) at least 62 or (2) caring for a child who is disabled or under 16.
In the second scenario, benefits are not reduced if the spouse claims Social Security before FRA, though the spousal benefits do stop when the child turns 16 unless that child is disabled. But in the first scenario, benefits are reduced if the spouse claims Social Security prior to FRA. The size of the reduction depends on how many months early the spouse gets their first check. This calculator from the Social Security Administration can provide an exact percentage.
It's important to note that spousal benefits do not increase beyond FRA, so there is no reason to delay until age 70 as there is with regular retirement benefits. That means the fourth way a future retiree can maximize their household's Social Security income is to ensure their non-working spouse claims benefits as soon as they reach FRA if the working spouse has claimed retirement benefits.
