Here's a little wake-up call: The average monthly Social Security retirement benefit is just $1,833, as of March 2023. Over the course of a year, that amounts to about $22,000. That probably doesn't look like it will support a comfortable retirement -- and for most folks, it won't.
So what should you do with that information? Two things: Have a solid retirement plan that will set you up to receive additional income in retirement, and aim to increase your Social Security benefits as much as you can. Here's a look at three ways to increase your benefits.
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1. Work for 35 years -- or more
A key thing to know is how your benefits are calculated. The formula the Social Security Administration (SSA) uses to determine your benefits is largely based on your earnings in the 35 years in which you earned the most (on an inflation-adjusted basis). Thus, it's rather important to have as many years' worth of earnings -- ideally, at least 35. If you've only worked and earned money in 30 years, there will be five zeroes factored into the formula, resulting in lower benefits.
Once you've got 35 years of work in the books, you might consider working more. Why? Well, because for every additional high-earning year, your lowest-earning year will be kicked out of the calculations, resulting in fatter benefit checks. Work, say, three extra years, and your three lowest-earning years will be swapped out. (Of course, if you're earning less (on an inflation-adjusted basis) than average after 35 years, working more won't affect your benefits much.
2. Earn as much as you can
Here's another, perhaps obvious, strategy: Earn more. After all, the more you earn over your working life, the bigger your benefits will be -- up to a certain limit. That limit is $160,200 for 2023, and it generally rises every year. Anything you earn above it will not be taxed for Social Security, and will not beef up your benefits, either.
It's easy to aim to earn more, but it's less easy to achieve that goal. Some creative thinking might help you come up with a strategy or two that will work for you. For example, you might see if you can earn any additional credentials or professional designations that can qualify you for higher-paying positions. Even without doing so, you might secure an income bump by moving laterally to a similar job in a different company. You might even consider switching careers -- to one that's more lucrative and still enjoyable.
Another option is to take on one or more side gigs, such as driving for a ride-sharing service, renting out property via a service such as Airbnb, making and selling things online or at local markets, doing freelance writing or editing, or pet-sitting.
3. Delay starting to collect your benefits -- or don't
Lastly, you can do some strategic timing to beef up your benefits. Know that everyone has a full retirement age -- the age at which they're eligible to start receiving the full benefits to which they're entitled, based on their earnings history. (For many people, it's between 66 and 67. For those born in 1960 or later it's 67.) You can start collecting our retirement benefits as early as age 62, though. Starting early will mean your benefits are reduced, but you'll receive more checks than if you hadn't started early, so starting early isn't that bad.
Still, if you can delay starting to collect your benefits, they will increase by about 8% for each year beyond your full retirement age that you delay, up to age 70. So if you can hang on and work until age 70, you can look forward to benefits that are heftier by between 24% and 32%.
Not everyone is able to delay starting to collect their benefits, as many people end up retiring earlier than they planned. Many people also simply need whatever income they can get, as soon as they can get it. But if you can delay, it can make a big difference in your future income.
The more you know about Social Security, the smarter decisions you can make regarding it. It's well worth trying to get as much as you can out of the program, as it makes up a sizable chunk of most retirees' income.
