If you're hoping for the largest possible Social Security check, you need to understand how decisions you make could affect your payout. Specifically, there is one choice that's guaranteed to reduce the benefit you end up with.
What is that decision that will reduce your payments? Here's what you need to know.
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Doing this will lead to a smaller Social Security check
How long you stay in the workforce is one of the most important factors when it comes to the size of your Social Security check. Specifically, if you do not work for at least 35 years, you are going to end up with a smaller retirement benefit than you would have had if you had put in more time on the job.
The reason for this is because the Social Security benefits formula is based on your average wages during the 35 years when your earnings were highest. The Social Security Administration records your earnings for each year you work and adjusts them for inflation. When you retire, it calculates your average monthly earnings based on this career history. You then get benefits equaling a percent of your average monthly earnings during your 35 most lucrative years.
If you work for less than 35 years, the Social Security doesn't just adjust its formula. Instead, it still calculates your average wages over that time period. And, for each year when you earned nothing, you will have a $0 wage year included in your calculation. So if you worked for just 20 years, you would have 15 years of $0 wages included when your average monthly wage is determined.
Obviously, a year of $0 wages is going to drag your average down -- and the more years you earned nothing, the bigger the impact will be. With a smaller average wage, your benefit check will shrink and you'll find yourself living on less in retirement. By contrast, if you work for more than 35 years and your salary has gone up over time, then some of your lowest earning years would not count in your calculation and your benefit would increase.
Should you try to work for longer?
Whenever possible, it's a good idea to try to make sure your career history spans at least 35 years -- or longer if you've increased earnings over time.
Of course, this isn't always an option for everyone. If you had a short career, make sure to look into all of the possible sources of Social Security benefits you could be eligible for. You may do better claiming spousal benefits on your spouse's work record if they had higher average earnings. You'll be eligible to get these spousal benefits only if your spouse has already claimed their own retirement checks though.
Ultimately, if you cannot work for at least 35 years, the important thing is to know that this will affect your Social Security check and you should plan accordingly, either by saving more or coordinating with your spouse to become eligible for checks on their work record at a time that makes sense for you.
