(Sam Swenson, CFA, CPA)
The amount you eventually receive in your monthly retirement benefits depends on several key factors. The difference between the average monthly benefit if you retire at 62 – the earliest age when you can receive Social Security – and the benefit if you retire at age 70 is $ 1,830, so it makes sense to know exactly how to maximize your entitlement. Of course, another $ 21,960 a year can be a long way off!
Here are three key actions that can help increase your social security checks.
1. Postpone the application for benefits
Sometimes it’s about what you do Do not do it it depends. By simply waiting to claim benefits after the age of 62 and even after the age of 67 (full retirement age), you will prepare for a much larger check for the rest of your life.
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By waiting, you will have lost checks for eight years, during which you could claim benefits but did not. The reward for this is a significantly higher monthly payment; you will increase your benefit by 8% for each year you postpone filing.
Now to the reality: It is quite possible that you will have to claim benefits at the age of 62 or another later in your 60s. You can simply decide that you want the money soon, or you will find that it is a necessity for health or family reasons. But if you have the option to postpone the benefit, it is crucial to know that it will help you when the time comes to choose.
2. Make more
Social security tax is charged on every dollar up to a maximum taxable wage of $ 147,000 in 2022. This means that out of all the amounts earned up to $ 147,000, you will pay into the social security system and receive the corresponding benefits when you apply for them in retirement.
Only about 6% of working people have actually reached the maximum taxable wage base in a given year, so don’t be angry if you are not in this position. The important thing is that you do everything you can to gradually increase your earnings. This will increase your monthly retirement benefit review, even if you are not receiving the maximum possible benefit.
3. Work for at least 35 years
Your social security calculation will take into account your 35 years with the highest incomes. Years when you have not earned an income (for whatever reason) will reduce your calculated benefit. Years without income are assigned a zero, which lowers the average.
Having some proof of income for at least 35 years will help you increase your calculated benefits and support a higher monthly retirement. While this may not be possible, of course, if life circumstances hinder you at one time or another, the fact is that it will affect how much you will eventually receive when you retire.
I put it together
To get the full increase of $ 1,830, you will need to do all three: postpone claiming until you are 70, earn at least the maximum taxable wage base each year, and do so at the age of 35 with the highest incomes. For most, this is a challenging task, so it may not necessarily be your goal.
A more sensible way to think about this is to consider the variables of your personal situation and do the best you can for each goal. If you can get close to earning the maximum wage, it’s a win in itself. If you manage to work 30 years before you finish, it’s a job well done.
The decision to accept social security is often difficult. Be aware of the factors that matter, but also try not to be too strict with yourself.
The $ 18,984 social security bonus is completely overlooked by most retirees
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