Social Security can be a very mysterious program, and oftentimes it can be difficult to truly figure out how the program works and how benefits for retirees are calculated.
But there are a lot of very specific, granular rules that the Social Security Administration (SSA) uses to make these calculations.
Knowing some of the key rules can make a big difference and potentially help you get more out of Social Security, whether you are younger and still working or a bit older and nearing the time when you actually claim Social Security. Here are three Social Security secrets that can lead to higher benefits and even bigger checks.
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1. Work for many years
One of the primary factors that goes into calculating your Social Security benefits is how many years you have worked, because when you are generating earnings, you are paying Social Security taxes. So the more you pay into the system, the more you should ideally get out.
The way the SSA calculates your primary insurance amount, or the full amount of benefits you would receive if you retire at your full retirement age (FRA), which is 67 for those born in 1960 or after, depends on your 35 highest years of earnings. If you don't work for 35 years, the SSA puts a zero in for all the years below 35 that you didn't work, which will greatly hurt the size of your Social Security checks.
But let's say that for some reason you didn't work for a large part of your life. You still might be able to qualify for Social Security's special minimum benefit, which requires at least 11 years of earnings. The point is, you want to have as many years of earnings as possible.
2. Delay benefits
Another tip for boosting your Social Security checks is to delay them for as long as possible. Retirees can begin claiming Social Security benefits as soon as the age of 62, but because you take them before your FRA, you'll see reduced benefits, potentially by as much as 30%.
You can also boost your checks if you delay taking them beyond your FRA. Retirees are allowed to delay taking them up to the age of 70. For each month you delay, the SSA will boost your benefits by two-thirds of 1 percentage point. That's an additional 8% per year, or 24% if you hold off until 70, the longest a retiree can delay benefits.
Now, this doesn't mean you should delay benefits. The decision should still be made based on your health and financial position in life. If you are 62 years old, have a lot of health issues, and are struggling to cover your expenses, it may make sense to claim Social Security early. But the best way to get a higher check is to put off claiming benefits for as long as possible, or until 70.
3. Make as high of a salary as possible
This one is obviously easier said than done, but having the highest earnings possible for the 35 years that go into the calculation is also key to having a bigger check. The SSA covers the majority of benefits through a payroll tax: 6.2% for individuals and employers and 12.4% for those who are self-employed.
There is a cap, which is referred to as the benefit base, on how much the SSA can tax a person's earnings, and this cap changes based on the cost-of-living-adjustment (COLA) to Social Security benefits each year. In 2022, the benefit base was $147,000, but in 2023 the benefit base is going up to $160,200.
This is a salary made by high-net-worth individuals, so it's not easy to attain, but the more you earn over your 35 years, the more in taxes you will pay into Social Security (up to a point) and the more you will ultimately receive when claiming benefits.
