The average retiree collecting Social Security receives about $2,000 per month from the government program. And while that number has gone up significantly over the last few years as a result of the annual cost-of-living adjustment, or COLA, many seniors feel their Social Security checks still don't go as far as they used to. The Senior Citizens League estimates someone who received Social Security back in 2010 now has 20% less buying power from their monthly benefits compared to 15 years ago.
As such, it's natural for seniors to look for ways to get more out of Social Security. While there are several ways you could receive a bump in benefits, only a few of them are in your control. One of the easiest ways to increase your benefit takes advantage of a little-known rule that could boost your monthly check up to 26.7%.
Here's what Social Security recipients need to know.
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How the government calculates your monthly benefit
Before we dive into how to increase your Social Security check, it's important to understand how the government calculates it.
There are only three factors that go into determining the size of your benefit:
- How much you earned during your career
- When you were born
- When you claim benefits
When you apply for Social Security, the government takes a look at your past earnings from every year of your career. It adjusts each years' earnings for inflation, indexed to the year you turned 60. Any earnings after age 60 don't get an inflation adjustment. It then selects the 35 highest years of adjusted earnings from your career and calculates the monthly average earnings from that sample. The resulting number gets plugged into the Social Security benefits formula to determine your primary insurance amount.
Your primary insurance amount, or PIA, is the amount of Social Security you're eligible to receive if you apply for benefits the exact month you reach full retirement age. That age is determined by when you were born. If you were born between 1943 and 1954, you reached full retirement age at 66. The age increases by 2 months for each year you were born after 1954 until maxing out at age 67 for anyone born in 1960 or later.
The last factor that determines your monthly benefit is when you decide to claim. If you claim Social Security before you reach full retirement age, you'll receive less than your PIA. If you wait, you'll see an increase in your monthly benefit up until age 70. To be precise, each month you delay Social Security beyond your full retirement age increases your monthly benefit by 2/3 of a percentage point of your PIA. So, someone born in 1958 with a full retirement age of 66 and 8 months could delay for 40 months for a 26.7% boost to their benefit.
If you claimed your benefits early, there's good news. You can still get that boost of up to 26.7% on top of your current benefit. You just have to take advantage of this one rule.
The little-known rule that can boost your benefit
If you've already claimed Social Security, you can opt to suspend your benefits upon reaching full retirement age. If you've already reached the threshold age but remain younger than 70, you can suspend benefits starting next month.
Doing so will allow you to start accruing credits that will increase your monthly benefit amount once you resume collecting it. Benefits will automatically resume starting at age 70 if you haven't restarted them already.
Someone born in late 1958 still has time to apply to suspend benefits the month they reach full retirement age and increase their monthly check by the maximum 26.7%. Note, you'll still see the annual COLA adjustment while benefits are suspended, so the actual increase will be even greater.
Of course, there are some significant drawbacks to this strategy.
First and foremost, it means going without your monthly Social Security check for several years. If you aren't in a position where you can forego benefits today in exchange for a bigger benefit later, then it's probably not worth the financial maneuvering required to take advantage of the option. However, if you can do without, the guaranteed return from suspending benefits is very appealing.
Second, if someone else is collecting benefits based on your earnings record, they'll no longer be eligible for those benefits. If your spouse is taking spousal benefits or your child is eligible through you, they'll see their benefits disappear or revert to any other smaller benefit they're eligible for. That could negatively impact your household income for the time being, but in many cases it's worth it in the long run.
Lastly, if you're enrolled in Medicare Part B, the Social Security Administration automatically deducts your premiums from your monthly benefit. Be sure you can afford to pay those premiums out of pocket before you suspend Social Security.
If you can manage those challenges, though, opting to suspend benefits could be worth it. You can request a suspension by phone, in writing, or in person at your local Social Security office. The suspension begins the month after your request is accepted. So, if you're fast approaching full retirement age, it's time to get things in order if you think suspending benefits and boosting your monthly payment is right for you.
