Author: Christy Bieber | April 15, 2019
Do the prep work now to benefit later
Are you hoping your Social Security benefits will provide you with a generous source of income in retirement? Unfortunately, wishing and hoping for big benefits is all many people do, as around 91% of pre-retirees don't understand practical ways they can maximize their benefits.
It may come as a surprise, but there are actual steps you can take -- perhaps starting today -- that can boost the benefits you may receive from the Social Security Administration. If you're not sure where to start, put some of these 10 items on your to-do list to get bigger Social Security checks as a senior.
1. Learn how Social Security benefits are calculated
Until you understand the basics of how Social Security benefits are calculated, you can't make informed decisions about how to boost those benefits.
Your benefits are based on your Average Indexed Monthly Earnings (AIME). AIME is calculated by figuring out your average income over the 35 years in which you earned the most, with each year's income indexed to adjust for wage growth.
Once your AIME is calculated, the PIA formula is applied. PIA stands for primary insurance amount, and it's the amount you get if you work until full retirement age (FRA). If you were born in 1960 or later, FRA is 67.
For 2019, the PIA formula works like this:
- You get 90% of the first $926 of AIME
- You get 32% of AIME over $926 up to $5,583
- You get 15% of AIME over $5,583.
Both the $926 threshold and the $5,883 threshold are "bend points" that can change annually but the percentage of AIME you get stays the same.
Knowing this formula is half the battle when it comes to increasing Social Security checks because it points to lots of concrete steps you can take, now or in the future.
2. Ask for a raise
Asking for a raise is one of the single best ways to increase your Social Security benefit because getting a raise can drive up your AIME. The more income you have, the higher the wages factored in when your Average Indexed Monthly Earnings is calculated.
With unemployment near record lows and the economy moving along at a steady clip, now's the ideal time to ask your boss for extra cash.
Come prepared with data to back up your request though -- you can show how you've taken on more responsibility, what successful projects you've done lately to boost the company's bottom line, or what salaries other people in your position are currently making.
The more generous your raise, the higher your Social Security benefits will end up being thanks to your increased AIME.
3. Take on a side gig
Today, there's an almost endless array of odd jobs you can easily start doing. You could drive for a ride-sharing company, go work for a food delivery app, babysit, dog walk, housesit, sell crafts online, or find something else that interests you.
When you bring in extra money from a side gig, this also increases your AIME -- and remember, the higher your average earnings over time, the bigger your Social Security benefits will be.
In most cases, when you take on a side gig, you're considered an independent contractor or sole proprietor and don't have an employer. So be aware you have to take care of paying in Social Security taxes (and other taxes) yourself -- there's no employer to do it for you.
4. Check your earnings record
Social Security keeps a record of all of your earnings subject to Social Security tax. You can see your earnings history by signing up for a my Social Security account or by logging in if you have an account already.
On your account page, you should see a full list of taxed Social Security earnings for each year you worked. If your recorded earnings don't match up with what you actually earned, make a Request for Correction of Earnings Record.
Be aware that if you have a very high income, you may not be taxed on the full amount earned each year. There's an annual cap on how much of your wages are subject to Social Security tax. For 2019, the maximum amount of wages you'll pay Social Security taxes on is $132,900 but this cap can go up each year.
5. Plan to work at least 35 years
While you may have visions in your head of retiring at 50, if you haven't worked for a full 35 years, you won't get the full Social Security benefits you otherwise could receive.
That's because when you don't get 35 years of work in, there are some years of $0 wages factored in when your AIME is calculated.
Working until you're older can sometimes be difficult, especially if you're in a physical job and you become concerned about your health. But even if you can't stay in your field, it can be better to earn at least some wages every year for at least 35 years so you avoid those dreaded $0s dragging down your average.
6. Apply for a disability freeze if you get sick or hurt
If you become permanently disabled or are temporarily disabled for a long time, you may not be able to earn very much when you're sick or hurt -- which will affect your AIME.
The good news is, the Social Security Administration recognizes that an inability to work due to disability shouldn't count against you.
If you can meet the SSA's definition of disabled and you successfully apply for a disability freeze, the years of lower earnings when you're disabled won't affect your Social Security benefits in the end.
7. Delay claiming your Social Security benefits
If you want the biggest Social Security check possible, one of the worst mistakes you could make is claiming benefits as soon as you become able to at the age of 62.
If you claim benefits before full retirement age, you will see a reduction in benefits for each month you're early. By contrast, if you can wait until after FRA, you earn delayed retirement credits up until age 70 so your benefit will see a boost.
Delaying claiming makes sense only if you'll live long enough to break even for the years of missed benefits. This usually takes around 10-14 years. If good health runs in your family, you're generally in good shape, and if your priority is to get the biggest monthly check you can, it usually pays to wait.
8. Coordinate with your spouse
When you're married, you don't necessarily have to claim Social Security benefits on your own work record -- you could claim on your spouse's work record. This could make sense if your spouse earned a lot and you earned very little. However, your spouse has to be retired first before you can claim your spousal benefit.
This doesn't mean your spouse should run right out and apply for benefits ASAP just so you can claim spousal benefits, though. There's also another factor to consider: survivor benefits.
For married couples, when one spouse passes away, the surviving spouse is entitled to keep the larger of the two benefits either spouse was receiving. So it can make sense for the higher earner to delay claiming benefits as long as possible to maximize his or her Social Security check -- thus raising survivor's benefits too.
Think through all of the possible ways you could claim benefits and decide together with your spouse what makes the most sense for your situation.
9. Delay your divorce
Receiving benefits on your spouse's work record isn't just an option for current spouses -- ex-husbands or ex-wives can also sometimes get bigger benefits by claiming on a spouse's work history.
But there's a catch. You're eligible for spousal benefits only if you were married at least 10 years before the divorce.
If you've been married for a year and can't stand your partner, you're probably not going to stay together for nine more years just to get bigger Social Security benefits. But if you're already at year eight or nine, you may want to just live apart for a while and hold off on the formal divorce until you hit that 10-year mark.
10. Make smart choices when it comes to working while getting benefits
If you've started claiming Social Security benefits but haven't yet hit full retirement age, working could reduce your monthly Social Security benefit check.
For 2019, you'll lose $1 of your Social Security benefit check for every $2 you earn over $17,640. So, earning too much outside income could make your checks a lot smaller -- or even reduce them to $0 if you earn too much.
The good news is, these benefits aren't lost forever. You'll get more money later if you reduce your benefits by working early on. So if you accidentally claimed Social Security benefits too early and you want to boost your Social Security income later on, getting a job and earning as much as possible can make sense.
Understanding Social Security helps you boost your benefit check
As you can see, maximizing your Social Security benefit can be complicated. But if you know how the program works, how your benefits are determined, and what you can do to increase them, you can get a hefty monthly check from the SSA that you can use to enjoy your retirement years.
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