Some people are of the opinion that the U.S. tax code is written to favor the rich. After all, tax deductions, by nature, are worth more to earners in higher tax brackets. And it's the wealthy who are most likely to be able to shield their income from the IRS by maxing out accounts like IRAs and 401(k)s.
But does the concept of favoring the rich apply to Social Security? That's debatable. However, here are three ways wealthier Americans are able to get more out of Social Security.
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1. They're eligible for higher benefits to begin with
Social Security doesn't pay the same benefit to all seniors. Rather, the benefit you're entitled to in retirement will hinge on what your wages look like during your 35 most profitable years in the workforce. If you're a higher earner, it therefore stands to reason that you'll be entitled to a higher payday from Social Security in retirement.
2. They're entitled to higher spousal benefits, too
You don't necessarily have to work and pay into Social Security to qualify for benefits in retirement. If you're the spouse (current or former) of someone who is eligible for benefits, you might be allowed to claim spousal benefits.
Spousal benefits can equal up to 50% of what your current or former spouse can collect from Social Security at full retirement age. But those who earn higher salaries will start out with larger benefits to begin with, leading to more-generous spousal benefits as well.
3. They might have an easier time boosting their benefits by waiting to file
Full retirement age is when you get to collect your complete monthly Social Security benefit based on your personal wage history. That age is 67 for anyone born in 1960 or later.
But there's an incentive to delay Social Security past full retirement age. For each year you do, up until age 70, your monthly benefits get to grow by 8%. And because wealthy seniors with higher incomes are more likely to have large nest eggs to tap, they can generally delay Social Security more easily for boosted benefits.
How to get more out of Social Security if you're not wealthy
You can make the case that people with higher incomes and more wealth to begin with get to benefit more from Social Security. But a few savvy moves on your part could lead to a much higher monthly retirement payday.
First, do what you can to boost your income during your working years by growing job skills and fighting for raises. You can also grow your wages with gig work, which will count toward your future benefits as long as you're reporting and paying taxes on that side income.
Next, make sure the Social Security Administration is recording all of your earnings from year to year. You can do this by creating an account on its website and checking your annual earnings statements.
And you can follow the lead of rich folks by contributing steadily to an IRA or 401(k) plan. This might not only shield some of your earnings from taxes, but also set you up to be able to delay Social Security past full retirement age. From there, the annual 8% boost that applies until age 70 is equally on the table for you.
