The average American is right to worry about how they will get by in retirement, because the average American has not socked away nearly enough for the future. Fortunately, there’s Social Security. According to the 2021 Retirement Confidence Survey, 87% of workers reported expecting Social Security to be a major source of income in retirement, while 92% of retirees said that it was, indeed, a major source.
Unbeknownst to many Americans, there are things you can do to make your future Social Security checks bigger — as much as 24% bigger, and perhaps even more than that. Here are several strategies to consider.
Image source: Getty Images.
1. Work at least 35 years
First off, aim to work for at least 35 years — because the formula that determines your ultimate benefits is based on an (inflation-adjusted) average of what you earned in your 35 highest-earning years. So if you’ve only worked, say, 28 years, there will be seven zeroes factored into the calculation, resulting in a smaller benefit.
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2. Earn as much as you can
Next, this might be obvious, but earn as much as you can. Yes, your current income might seem just fine, but if it could be higher, it could increase your ultimate Social Security benefits, as bigger earnings would be factored into the calculation. You might boost your earnings in a variety of ways, such as:
- Asking for a raise (perhaps every few years)
- Taking on a side gig or two for at least a few years
- Earning a professional designation to qualify you for higher-paying positions
- Moving from one job to a higher-paying one every few years
- Changing careers entirely, into a higher-paying (but still satisfying) one
Also, consider working a few years beyond the minimum of 35 — because if you’re earning more (on an inflation-adjusted basis) than you have before, each additional year you work will kick out the lowest-earning year used to calculate your benefits.
3. Consider delaying starting to collect your benefits
A big way to control how much you collect from Social Security is by starting to receive your benefits earlier or later than your “full retirement age” — the age at which you can start collecting the full benefits to which you’re entitled, based on your work history.
You can start collecting benefits as early as age 62 and as late as age 70 — and for most of us, our full retirement age is 66, 67, or somewhere in between. Starting to collect before your full retirement age will shrink your benefit checks (but you’ll receive many more of them), while delaying beyond your full retirement age will make them about 8% bigger for each year you delay. So delaying from age 67 to 70 can make your benefits fully 24% bigger — that’s enough to turn a $2,000 check into a $2,480 one, and annual benefits of $24,000 into annual benefits of almost $30,000.
The table below shows what percentage of your full benefits you’ll receive depending on when you start collecting them:
|
Start Collecting at: |
Full Retirement Age of 66 |
Full Retirement Age of 67 |
|---|---|---|
|
62 |
75% |
70% |
|
63 |
80% |
75% |
|
64 |
86.7% |
80% |
|
65 |
93.3% |
86.7% |
|
66 |
100% |
93.3% |
|
67 |
108% |
100% |
|
68 |
116% |
108% |
|
69 |
124% |
116% |
|
70 |
132% |
124% |
Source: Social Security Administration.
Image source: Getty Images.
4. Look beyond your own benefits
Next, understand that if you never officially earned very much — perhaps because you were in a very low-earning profession or maybe because you were out of the formal workforce for many years, caring for kids or others — you aren’t stuck with benefits based on your low earnings.
You might, for example, claim a “spousal benefit” based on your spouse’s earnings. You won’t get his or her full benefit amount, but you may collect up to 50% of it, which might still be significantly more than what you would have otherwise received. You can even collect benefits based on your ex-spouse’s benefits, if you meet the criteria, such as having been married for at least 10 years and your not having remarried.
There are survivor benefits, too, if your spouse has died. Benefits may even be available for surviving children and other dependents. Read up on the topic, if this might apply to you.
Finally, if you’re married, be sure to coordinate a Social Security strategy with your spouse. For example, know that when one of you dies, the surviving spouse be left with only one Social Security check coming into the household, but it will be the greater of the two. So it can be worth trying to delay starting to collect the benefits of the higher-earning spouse in order to maximize them — so that when one spouse is left, he or she can collect that maximized benefit.
5. Don’t earn too much
Finally, to get the most out of Social Security, try not to earn too much, lest you get taxed by Uncle Sam. That’s right — up to 85% of your benefits can be taxed. Whether your benefits end up taxed or not depends on your “combined income,” which is your Adjusted Gross Income (“AGI”), plus nontaxable interest, plus half of your Social Security benefits. The following table offers the thresholds for taxation:
|
Filing As |
Combined Income |
Percentage of Benefits Taxable |
|---|---|---|
|
Single individual |
Between $25,000 and $34,000 |
Up to 50% |
|
Married, filing jointly |
Between $32,000 and $44,000 |
Up to 50% |
|
Single individual |
More than $34,000 |
Up to 85% |
|
Married, filing jointly |
More than $44,000 |
Up to 85% |
Source: Social Security Administration.
Note that the 50% and 85% figures don’t mean that you’ll have to fork over 50% or 85% of your benefits. Those are the portions of your benefits that can count as taxable income.
Meanwhile, some states — 13 of them — tax Social Security benefits to some degree. Read up on your state’s rules before worrying too much about this, because among the states that do tax benefits, many only tax those with high incomes or tax at a very low rate.
So don’t fret that you will be stuck with ultra-low Social Security benefits — because you may be able to increase them significantly. Still, the average monthly Social Security retirement benefit was recently $1,663 — or about $20,000 annually. Even if you boost your benefits by 50%, it won’t become a princely sum.
That’s why each of us should develop a solid retirement plan detailing how much we’ll need to amass by retirement — and how we will do so. It should also include a strategy to maximize Social Security benefits.
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