By James Royal
Social Security provides a secure, fixed income to retirees and others, helping many to afford their golden years. Given the fact that you get reliable money for the rest of your life, many people want to max out their monthly check. But how do you do that?
Broadly speaking, you have three levers to max out your Social Security income:
- Work longer. The more years you work, the more money Social Security will pay, up to your best 35 years of income.
- Earn more. If you pay more into the Social Security system, your payout later will be larger, up to a point.
- Delay your benefit. If you wait longer to claim your benefit—up to age 70—you’ll claim a higher monthly payment.
But those methods are only part of the story, and those looking for a bigger benefit check have a few other ways to boost their payout.
1. Work More Years
While you can’t always earn a higher salary, you may be able to work longer, and that’s the first step for maxing out your Social Security paycheck.
“Social Security benefits are calculated from the 35 years of work in which your salary was at its highest,” says Mark Bodnar, CFP, wealth adviser at Octavia Wealth Advisors in Cincinnati. “This is important to consider, because if you have not worked for 35 years, zeros will be factored in, lowering your overall payout.”
But even if you have 35 years under your belt, adding some additional higher-earning years can boost your average.
“If an individual already has a complete 35-year earnings record, the additional earning can make a difference in future benefits only if it causes an earlier year’s lower earnings to drop off the record,” says Beth Lynch, CFP, financial adviser at Fort Pitt Capital Group in Pittsburgh.
Later on in your career you’re probably making more than when you first started out. So if you can earn more and push some of those earlier years out of the calculation, you’ll get a higher Social Security benefit.
But working longer benefits you in a couple other ways: You’ll be able to amass more savings and delay the start of drawing down assets in your retirement plan, such as an IRA or 401(k).
2. Earn More Money
The next obvious lever to pull to get a Social Security paycheck is to earn more money. Social Security uses a formula that factors in how much you’ve paid into the system. The more you’ve paid in, the bigger your benefit—up to a point.
Social Security taxes your wages 6.2 percent each year, and your employer pays another 6.2 percent, up to $142,800 (for 2021) in income. Paying taxes on the maximum would give you the highest possible Social Security payout, all else equal. So if you pay taxes on the maximum, which tends to rise each year, then you’re topping out your contributions to the system.
For those who paid at the taxable maximum during their entire working lives and claimed their full benefits at age 70, the starting payout in 2021 would be $3,895. This figure gives you the top end of what they could expect, though that number should grow over time, thanks to adjustments.
But even if you don’t earn this much before retirement, you may be able to increase your check.
“Work during retirement to increase your benefit payout,” Lynch says. “A person who continues to work after claiming benefits may also be able to increase their benefits. Earnings during retirement continue to go on a person’s earnings record.”
3. Delay Your Benefit
Delaying your benefit will increase your benefit check, but there’s a limit to how far it will go.
You can begin taking your Social Security benefit at age 62, though you’ll receive less than if you waited until full retirement age (67 years old, for those born in 1960 or later). If you want the biggest check, you can wait as late as age 70, but waiting beyond that won’t get you anything extra.
“Delaying benefits will earn an individual eight percent in delayed credits for each year after full retirement age,” Lynch says.
So if your benefit at full retirement age were $1,000, you’d be able to claim $1,080 per month by waiting a full year. However, you need not wait the full year to claim some of the increase. That is, for every month you delay your benefit, you’ll receive a benefit that is ⅔ of one percent higher, which is just the 8 percent annual rate divided by 12 months.
So if your full retirement age is 67 and if you wait three full years, until age 70, you’ll be able to claim 124 percent of your full benefit.
Plus, by delaying your benefit, you’ll get another “raise”—the cost of living adjustment (COLA) that tends to increase the monthly payout over time.
“This will enable a person to start out with a higher benefit and receive bigger ‘raises’ each year, as the annual COLA is applied to the higher amount,” Lynch says.
4. Married? Divorced? You Have Options
Social Security offers a lot of benefits to people in a lot of different scenarios, and some of the most complex choices occur if you’re married or divorced. So spouses and ex-spouses need to carefully consider the options and what works best for them, especially in the area of survivor’s benefits when one spouse predeceases the other.
“If married, you have to consider your spouse,” says Eric Bond, wealth adviser with Bond Wealth Management in the Los Angeles area. “How much the surviving spouse will receive at the passing of the first spouse will depend on when that [deceased] spouse started their Social Security.”
“The largest benefit stays in the household when a spouse dies,” says Beau Henderson, lead retirement planning specialist with RichLife Advisors in Gainesville, Georgia. “This is why we need to think about the impact of our claiming decision on both lives. There are a lot of scenarios and they need to be modeled to give you the best result.”
And just because you’re divorced doesn’t mean you can’t claim Social Security benefits on your ex-spouse’s earnings. But there are specific requirements that you need to meet.
The existence of a spouse or ex-spouse complicates the planning process and means that you need to model more scenarios to see what maximizes your benefits.
5. Work with a Specialized Financial Adviser
“There are over 500 possible ways to claim your benefit, and most Americans claim with very little thought into this decision that represents on average 40 percent of their retirement income,” Henderson says. “Only four percent of people in the U.S. choose the optimum claiming strategy that would give them the most money over their life expectancy.”
For this reason, it could make sense to work with a financial adviser who specializes in claiming Social Security benefits, especially if you have an unusual situation.
“Social Security Administration employees are not allowed to give advice, and the majority of financial advisers are not helping with this benefit, because they are not educated in the area or because they are not compensated,” Henderson says.
Because of the program’s complexity—a result of trying to help people in many different situations—you may need specialized advice to find the best solution for you. And that could pay off handsomely, even though it could cost you a little bit of money upfront.
It’s easier to get a bigger Social Security check if you’ve aimed toward that goal your entire working life. But even if you’re down to the wire with only a few years until you want to claim your check, you still have a number of things to do to boost your benefit, and waiting even a couple years can significantly increase your payout and do so permanently.
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