Since the beginning of Social Security in 1935, a monthly Social Security check has become an expected part of retirement income for most Americans. And why not? Money has come out of your check every time you got paid and, supposedly, gone into the Social Security Trust Fund to ensure that you have money coming in for as long as you live. There have been questions about whether Social Security will survive, but as long as workers are paying into the Social Security system there will be money paid out to retirees.
Understandably, you want the largest Social Security check possible. So, what can you do now to maximize the amount you get later? Here are four actions to consider.
Wait to claim benefits until 70
You can claim Social Security benefits when you turn 62. But turning on your Social Security at that age means you will get a smaller check than if you waited until your full retirement age (FRA). And you’ll get that smaller payout for the rest of your life. The only possibility for an increase is in the annual cost of living adjustment (COLA) that the federal government bestows on you each year.
Full retirement age (FRA) is determined by the year you were born. The Social Security Administration shows full retirement as being between 66 and 67. If you wait until your FRA to collect benefits you will receive the full amount.
However, to maximize the size of your check, wait until 70 to collect. Doing so means the amount of your Social Security check will increase by 8% each year from your full retirement age to age 70. The increase is referred to as delayed retirement credits. No more credits are earned past age 70.
Make sure you have at least 35 years of work history
Your Social Security benefit is calculated based on your 35 highest income years. If you worked fewer than 35 years the calculation will include some zeros. For example, if you worked 30 years, your income for those years will be listed along with zeros for 5 additional years, which make up 35. The zeros will bring down your average income. That’s why it’s important to have a work history of at least 35 years.
Continue working if your income is higher later in life
As mentioned above, it’s important to have a 35-year work history so you don’t have zeros included in your benefit calculation. But let’s take it a step further.
If you’re able, if you still enjoy what you do, if you’re not ready to quit, etc., consider working longer. For every year you work and earn more than you did in some of the early years of your career, your current income replaces years you earned less, and increases the amount of Social Security you receive. For example, if you earn $100,000 this year and you earned $50,000 when you first started your job, the $50,000 disappears and is replaced by the $100,000, thus improving the SSA calculation and giving you a larger check.
Investigate spousal benefits
Married couples can work together to maximize the value of their combined checks. A lower-earning spouse may want to claim a spousal benefit, rather than a benefit based on their own work history. A spousal benefit allows a lower-earning spouse to receive up to 50% of the SSA benefit received by the higher earning spouse.
If a lower earning spouse is entitled to $500/month on their own work history, and their spouse receives $1500/month, then the lower earning spouse can receive up to $750/month using the spousal benefit. The amount of the spousal benefit depends on whether each spouse begins receiving benefits before full retirement age.
Another option is called the survivor benefit, which is different than the spousal benefit. The survivor benefit allows a surviving spouse to convert from the Social Security benefit they receive to the amount that was being received by their deceased spouse at the time of death.
If the surviving spouse was receiving $500/month, whether on their own work history or as a spousal benefit, and the deceased spouse was receiving $1500, the surviving spouse can begin receiving the $1500/month. The $500 goes away. You cannot receive both.
Not every strategy is right for everyone, but it’s worth your time to see what may work for you. The old adage applies here: Don’t leave money on the table.