(Sam Swenson, CFA, CPA)
Getting the most out of Social Security is a common goal for those approaching retirement, and understandably so: With inflation at a multidecade high and pension plans increasingly uncommon, funding retirement isn’t as seamless as it once was. The good news is that if you’re still working, there are a number of different levers to pull to ensure you receive the maximum Social Security benefit to which you’re entitled.
Here, we’ll look at three of the more manageable things you can do to ensure you’re getting as much as possible from the Social Security Administration (SSA) when it comes time to file for benefits.
1. Delay filing for benefits
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The longer you wait to claim Social Security, the more you’ll receive each month. It’s as simple as that.
You’re first eligible to claim benefits at age 62, but you have the option to wait until 70. Waiting past your full retirement age (FRA) will help you lock in a much larger monthly check, and will likely increase your cumulative lifetime benefits if your life expectancy extends well into your 80s.
In the same vein, maintaining your health to the extent possible is one of the behaviors that will allow you to wait until age 70 before filing. Those with shorter life expectancies might need to take Social Security sooner, which will ultimately limit their cumulative lifetime benefit unless they were to live longer than the actuarial tables indicate.
With that said, only so much of your health profile is within your control. There’s absolutely nothing wrong with taking Social Security benefits at age 62 if you need them.
2. Earn more if you can
Your calculated benefit amount will be affected by the number of years you’ve worked as well as how much you’ve earned during those years. Wages are taxed up to the maximum taxable Social Security wage base for retirement insurance purposes; for 2022, this amount is $147,000. Put another way, you’ll pay into the Social Security system on every dollar you earn up to $147,000.
If you’re earning below this amount, you might consider taking on additional work to increase your future retirement benefits. All amounts paid into the system, up to the taxable wage base, will have a positive impact on the amount you’re ultimately able to claim. Side hustles or extra part-time work can go a long way when it comes to funding the retirement you want.
3. Find work you enjoy
Not only are you likely to earn more, but you’re also more likely to stick with a job if you derive some fulfillment from it. Since Social Security benefits are calculated on your 35 highest-earning years, you can expect higher retirement benefits if you avoid logging zero-income years on your record.
For example, say you were to take time off early in your career to care for an aging relative or to take a travel sabbatical. Whatever the reason for your gap in work history, it remains sensible to have as many working years as possible when it comes to your future retirement benefits. Finding new work that you enjoy will pay dividends down the line, primarily in the form of higher Social Security checks.
Know the rules for a higher benefit amount
Part of receiving a higher check in retirement is simply knowing how the amounts are calculated and then behaving accordingly. Potentially the easiest variable to manage is the time at which you claim benefits. By deferring your claim as long as you reasonably can, you set yourself up with a higher monthly check for the rest of your life. Not the worst deal.
Also remember that earning more (and finding a job you actually enjoy) can go a really long way when it comes to your final benefit amount. Work that you enjoy doesn’t always feel like work. Staying the course in a career can help you become eligible for more when it finally comes time to retire, so try to find work you don’t mind doing.
Like most things in life, earning higher Social Security benefits is about controlling what you can control. With knowledge of how benefits are calculated, you’ll set yourself up for a more financially secure retirement.
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