Some of the retirement income sources you have at your disposal aren’t guaranteed to last forever. You might, for example, bring a nice, robust nest egg with you into retirement. But if you don’t manage your withdrawals carefully, or if the stock market underperforms, you could end up depleting your savings in your lifetime.
Social Security, on the other hand, is designed to pay you a monthly benefit for life. And so it’s important to do what you can to snag the highest benefit possible. Here are some strategies that could lead to a richer payday — and more long-term financial security for you.
1. Earn more money
The monthly benefit you’re entitled to from Social Security isn’t arbitrary. Rather, it’s based on your personal wage history. As such, the more money you earn, the more your monthly benefit has the potential to rise.
Now you should know that there may come a point when higher earnings don’t do anything for your future benefits. Each year, there’s a wage cap put into place that determines how much earnings you pay Social Security taxes on and how much earnings count toward your future monthly benefits.
This year, the wage cap is $147,000. And it’s likely to change — namely, rise — in 2023. So if you’re already a very high earner, boosting your income may not result in a more generous Social Security payout. But if you’re earning a $60,000 annual salary, growing your job skills and boosting your pay to $70,000 a year could impact your future benefits a lot.
2. Delay your filing
You’re entitled to your full monthly Social Security benefit based on your income history once full retirement age (FRA) arrives. That age is either 66, 67, or somewhere in between, depending on your year of birth.
But you don’t have to file for Social Security at FRA. In fact, if you delay your filing, your benefits will grow 8% a year up until you turn 70. That means that if your FRA is 67, you have the potential to increase those monthly paychecks by 24%.
3. Upgrade to a spousal benefit
You may have only earned so much money during your career. But if you’re married to a higher earner whose Social Security benefit is much higher than yours, you may be eligible for a boost via a spousal benefit.
If you claim a spousal benefit at your own FRA, you can receive 50% of your spouse’s benefit on a monthly basis. Now, let’s say you worked and are entitled to a $1,400 monthly Social Security benefit based on your wage history. If your spouse is eligible for $3,000 and you claim a spousal benefit, you’ll get $1,500 a month instead.
To be clear, you cannot collect your own benefit and a spousal benefit at the same time — it has to be one or the other. But if a spousal benefit results in a higher monthly paycheck, then that’s really a no-brainer.
Social Security may end up being an essential income source for you, especially later on in retirement. As such, it pays to do what you can to snag the highest monthly benefit you can. That could mean doing your part to raise your income, delaying benefits, or being strategic about the type of benefit you claim.