Don’t settle for average — or less — when you can beef up your Social Security benefits.
The average monthly Social Security retirement benefit was $1,831 as of February 2023. You’re probably thinking, “Gee, that’s not very much” — and you’re right. It’s only about $22,000 over the course of a year.
Fortunately, that’s just the average benefit. There are plenty of ways to position yourself for above-average benefits when your turn arrives to start receiving Social Security benefits. Here are three effective strategies.
1. Earn more
Here’s an obvious strategy: Earn more. After all, your benefits are determined in large part by your earnings history. The more you earn, the more you’ll eventually collect — though there’s a limit. For 2023, for example, the most anyone will collect as a monthly benefit is $4,555, or about $54,660 for the year.
Of course, earning more is easier said than done, right? Still, there are some ways you can go about it. For starters, ask for a raise every now and then. According to a report by the folks at Payscale.com, while only 37% of survey respondents had asked for a raise, among those who did, fully 70% got a raise, with 39% getting as much as they’d asked for. (Pro tip: It helps to deserve a raise when you ask for one.)
You might also change jobs every few years, because you may be able to negotiate a salary significantly higher than what you’re getting at your current job. You might even consider changing careers, if there’s a lucrative alternative career that appeals to you.
2. Work for at least 35 years
Next, to maximize your Social Security benefits, aim to work for 35 years — at least. That’s because the formula used to determine your Social Security benefits is based on your earnings in the 35 years in which you earned the most — with all figures adjusted for inflation, of course. So if you work for, say, 30 years, the formula will incorporate five zeroes into its calculations, which will hurt your chances of achieving above-average benefits.
Clearly, working and earning for 35 years is valuable. But you might be able to build up your benefits even more by working more than 35 years — if you’re able and if you’re earning significantly more these days than you have in the past (on an inflation-adjusted basis). Do so, and for each good-income year you add to your earnings history, your worst-earning year will get kicked out of the calculation.
It’s also worth noting that working a few more years than you planned to may deliver other critical benefits, such as allowing you to sock away more for retirement, allowing you to remain on your employer’s health plan for a few more years, and reducing the number of years in which you’ll have to draw on your nest egg.
3. Delay starting to collect your benefits
Finally, there’s timing. You can start collecting your benefits as early as age 62, and you might delay doing so until age 70.
Here are some things to know: Each of us has a “full retirement age” — of 66, 67, or somewhere in between. Start collecting your benefits before that age, and they will be less than the “full” benefits to which you’re entitled. Conversely, for every year beyond it that you delay, your benefits will grow by about 8%. So delay from age 67 to 70, and you can turn a $2,000 monthly benefit into a $2,480 one.
The decision regarding when you’ll start collecting benefits is a very important and meaningful one, so read up on it and give it a lot of thought.
Here’s one more reason you might want to delay starting to collect your benefits: Know that if you’re married, your household will collect two Social Security benefits in retirement. When one spouse dies, though, there will be only one benefit check arriving each month — and it’ll be the higher one. So if you’re the spouse with higher earnings, it can be worth trying to delay claiming your benefits, to beef them up, while starting to collect your lower-earning spouse’s benefits earlier. (Or delay them both, if you can and it makes sense.)
The more you know about Social Security, the more you’ll probably be able to get out of the vital program.