Gen Xers are next in line to claim Social Security, with the oldest members just a few years away from becoming eligible. If you're a part of this demographic, it's nice to think you'll finally get something back from the program that you have spent your entire working life paying into. But a lot of Gen Xers are also worried about the program's future.
There's a lot we don't know yet, but there are some steps Gen Xers can take to ensure they get the most money possible from the program. Here are four of them.
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1. Remain in the workforce at least 35 years before claiming
Your Social Security benefit is based on your average monthly earnings, adjusted for inflation, over your 35 highest-earning years. You can qualify for benefits if you've worked fewer years than this, but you might be disappointed by how much you get.
The Social Security Administration (SSA) includes zero-income years in your benefit calculation when you've earned income in fewer than 35 years. Even one of these zero-income years can reduce your checks by a few dollars, which can lead to thousands of dollars less in benefits over your lifetime.
Working at least 35 years before applying for benefits is the way to avoid shortchanging yourself. And if you're able to work even longer, it could net you bigger checks because people often earn more later in their careers. Once you pass the 35-year mark, the government removes your lowest-earning years from your benefit calculation, which can increase the size of your checks.
2. Do what you can to boost your income
Anything you can do today to increase your income will also lead to larger Social Security checks, as long as you earn less than the maximum income subject to Social Security payroll taxes. This threshold is $160,200 in 2023.
There are many ways to do this. You can pursue promotions or work overtime at your existing job or seek out higher-paying employment elsewhere. You can also start a second job in your free time.
3. Have a plan for claiming Social Security
Though you become eligible for benefits at 62, this is considered claiming early, and the SSA reduces the size of your checks by up to 30%.
To avoid this, you must wait until your full retirement age (FRA) to claim. For Gen Xers, this is 67, since all Gen Xers were born in 1960 or later. You can also delay benefits past FRA, and your checks will continue to increase until you reach your maximum benefit at 70. This is 124% of your full benefit per check.
Whether you claim benefits early or delay them depends on your financial situation and life expectancy. Those who don't expect to live much past their 70s and those who can't afford to pay their bills without Social Security's help are often better off signing up early.
It's a good idea to have a tentative claiming age in mind so you know roughly how much you'll get from the program each month. You can create a my Social Security account for an accurate estimate of your monthly benefit at various claiming ages based on the current benefit formula. It will help you to figure out when you want to apply.
4. But be prepared to adapt as necessary
Many Gen Xers are rightfully concerned about Social Security's future, since the program's trust funds are expected to be depleted in a little over a decade. That doesn't mean it will disappear, but it might provide less than what you expect today.
Congress could make changes to the program before this happens, but there's no way of knowing what it will do. So be ready to adapt your Social Security strategy as necessary. Keep tabs on any changes to the program that could affect you so you're not surprised later on.
