Social Security retirement benefits may not be on your radar if you’re still working. After all, you won’t be claiming them until you’re a senior. But you may be surprised to find there are actually some important steps to take during your career to maximize your future Social Security and ensure you have the money you need in your later years.
Here are three things you may want to consider doing right now to help you earn the largest Social Security benefit later.
1. Increase your income
Your income is the one factor that affects your Social Security benefits most of all. In fact, your standard benefit (the amount you get at your full retirement age) is calculated based on an average of the amount you earned in the 35 years your earnings were highest (after adjustment for inflation).
This means making more money is the surest path to a bigger benefit. And the more you can increase your income and the sooner you do it, the bigger your benefit is going to be.
You can try to make more money in a number of ways, including taking on an extra job or extra hours, improving your credentials to get hired for higher-paying work, or even something as simple as negotiating better pay whenever you get a new job or go to an annual performance review.
2. Keep tabs on your earnings record
In order to calculate your benefit, the Social Security Administration has to keep track of how much you earn. The SSA keeps an earnings record, which you can review by logging into mySocialSecurity.gov.
If you’re hoping for the highest possible future retirement check, you cannot afford to have any mistakes on your earning record. Check your record once a year to make sure the prior year’s wages were reported correctly.
If there’s a mistake, you can contact Social Security and get it corrected — but you may need to provide proof of how much money you actually made. It will be a lot easier to come up with evidence of your earnings from last year or even from a few years ago than it would be to try to fix the record when you’re 65 if you notice then that the SSA inaccurately reported your wages from when you were 29.
3. Invest in a Roth Account
Finally, there’s another surprising step you may want to take now to try to get a higher Social Security benefit later. That’s investing in a Roth account for retirement instead of a traditional one.
Both 401(k) and IRA accounts can be structured as Roth accounts although not all employers offer Roth 401(k)s. When you invest in a Roth, you don’t get to claim a tax break in the year you contribute. Instead, you defer the tax savings until retirement, when you can make tax-free withdrawals.
Here’s how this affects the size of your Social Security check. Social Security determines if your benefits are taxable by looking at half of your retirement benefit plus some nontaxable income plus all your taxable income. If this income calculation is higher than $25,000 for a single tax filer or $32,000 for a married joint filer, part of your benefits will be taxed.
The thresholds at which benefits become taxed aren’t indexed to inflation, so they don’t change over time. Many future retirees will find their income is above these thresholds since the limit isn’t very high. So if you have a lot of other taxable income as a retiree, you’ll end up with a smaller Social Security benefits check once the government takes its cut.
And that’s where Roth accounts come in. Distributions aren’t taxable and don’t count toward determining if you’ll owe tax on Social Security. You can withdraw whatever you want and still get your full Social Security benefit without the IRS taking a cut — thus ending up with larger checks in many cases.
You should start working on these three things ASAP if you want to get the biggest Social Security check you can for your future retirement. Don’t wait until it’s too late and increasing your income or correcting mistakes becomes less possible as a means of maxing out your monthly retirement benefits.
