Social Security income is critical to most retirees and it's likely to be important to you, too, in your retirement. Deciding when to start collecting your benefits can be tough to do, as starting as soon as possible, at age 62, means your checks will be smaller, while delaying as long as possible can increase your checks by as much as 24%. Many people think that they have to choose between retiring early and increasing their Social Security income -- but that's not quite the case.
Here are three perspectives on how you might boost your Social Security benefits even if you're an early claimer.
Selena Maranjian: One good way to boost your Social Security benefits is to make the most of the formula used to calculate your benefits. For instance, it's based on the 35 years in which you earned the most money. So if you worked for 40 years and earned more each year, it won't count your earnings in your first five years. If you worked 40 years and were only working part-time for a few of them, while you cared for children or aging parents, it will still select your 35 top-earnings years. If you have only 29 years of earnings, the formula will enter six years' worth of zeros.
So if you have only 33 years of work behind you, consider working two more years before claiming Social Security benefits, because that will boost your benefits. Even if you have, say, 29 years of work and want to retire soon, any additional year of work that you can achieve will boost your ultimate benefits, replacing a zero in the formula.
Note, too, that the amount of your earnings matters. So if there is any way that you can boost them while you're working, go for it. You might, for example, spend one or two years with a part-time job on the side. Or apply for a higher-paying job -- or pursue a raise at your current job.
Jason Hall: Rather than explain how to boost benefits, I'd like to help you avoid seeing your benefits shrunk. If you retire before your full retirement age -- 66 for anyone born between 1943 and 1954, and 67 for anyone born in 1960 or later -- your non-Social Security earnings could actually reduce the amount of your benefit if you claim early. If you claim your benefit before reaching full retirement age but plan to continue earning money, your benefit will be reduced by $1 for every $2 above $15,720 you earn in 2016.
It's not all bad news, though. If your earnings cause you to see a cut in your benefit before full retirement age, the Social Security folks will adjust your monthly benefit up once you reach full retirement age, based on the amount that was withheld between when you filed for benefits and reached full retirement age. There's one more way your in-retirement (but pre-full retirement age) earnings can actually boost your benefit: If a later year's income ends up being one of your highest income years, Social Security will recalculate your benefit at full retirement age and factor that in.
In short, be aware of how earnings can cut your paycheck before full retirement age, but be reassured that any sum lost will get factored back in once you reach full retirement age.
Brian Stoffel: If you're married, you still have lots of wiggle room to increase your benefits -- even if you started getting monthly Social Security checks at age 62. How? Because your spouse can delay claiming his or her benefits all the way until age 70.
Of course, each couple's collective nest egg will have a huge effect on how long the "other" spouse can wait to claim, but the benefits are twofold. First, for every year your spouse waits to claim, the lifetime payout increases by 8% -- all the way up to 132% of his or her "full" retirement benefit.
But perhaps more importantly, if your partner will be getting a larger check than you get, you will become entitled to that larger check should you outlive your partner. That's a nice piece of life insurance that you don't have to give up by claiming your own benefits early.
So go ahead and consider retiring early and claiming Social Security benefits early. There are still some ways to maximize those benefits, even for early retirees.