In March 2022, the average senior received $1,665 per month from Social Security, but there were many who fared much better. This year’s maximum Social Security benefit is $4,194 per month. However, in order to do so, you must earn a very high income throughout your working years. Fortunately, there are ways to increase your pay that do not require a six-figure salary. Here are three ideas that everyone should think about.
1. Have worked for at least 35 years
Your benefit is calculated by the Social Security Administration based on your average monthly income over your 35 highest-earning years, adjusted for inflation. This is referred to as your monthly average indexed earnings (AIME). Those who do not work at least 35 years are subject to some zero-income years, and even one of these can reduce your benefit.
For example, if you earned $50,000 per year for 35 years, adjusted for inflation, your AIME would be $4,167. The government then enters this information into a formula to calculate your monthly benefit amount. If you turned 62 in 2022, the program would pay you $1,927 per month with an AIME of $4,167.
However, if you only worked for 34 years, your AIME would fall from $4,167 to $4,047, and your monthly benefit would fall from $1,927 to $1,889. That’s a monthly savings of $38. It may not appear to be much, but it adds up over time. That’s a difference of more than $9,100 if you claim Social Security for 20 years.
That is why it is best to work at least 35 years and preferably longer. Most people earn more later in their careers than they did earlier in their careers. Working past the age of 35 often increases your Social Security benefits because these later, higher-earning years eventually replace your earlier, lower-earning years in the benefit calculation.
2. Double-check the accuracy of your earnings record.
In your earnings record, the government keeps track of how much money you’ve paid in Social Security taxes over the years. You can see this by signing up for a My Social Security account. You’ll need to answer some identity verification questions when you first create your account. However, once that is completed, you will only be able to log in using your username and password.
It’s a good idea to double-check your earnings record at least once a year to ensure that the income shown here corresponds to your own records. It is usually correct because the information comes directly from the IRS. However, if you made an error on your tax paperwork, such as transposing a digit in your Social Security number or failing to notify your employer of a name change, you may see some errors. This could result in a lower Social Security benefit than you are entitled to.
You should immediately notify the Social Security Administration of any discrepancies by completing and submitting a Request for Correction of Earnings Record form, along with copies of your own records showing how much you actually earned during the year.
There is an exception for those with high incomes. You do not have to pay Social Security taxes on all of your earnings. In 2022, you only owe taxes on the first $147,000 you earn, which was lower in previous years. If you earned more, your earnings record may show a figure that differs from your actual income for the year. Before reporting an error to the Social Security Administration, double-check the maximum income subject to Social Security tax for the year in question.
3. If it makes sense for you, postpone benefits.
You can apply for Social Security as early as age 62, but you must wait until your full retirement age (FRA) to receive the amount based on your work history. Depending on your birth year, this can range from 66 to 67.
Every month you claim benefits under your FRA, your checks get smaller. Those with a FRA of 66 receive 75 percent of their full benefit per check at the age of 62, whereas those with a FRA of 67 receive only 70 percent of their full benefit per check when they claim right away.
Delaying benefits increases your checks gradually until you reach 70 and are eligible for your maximum benefit. That translates to 124 percent of your full benefit per check if your FRA is 67, or 132 percent if your FRA is 66.
Those who expect to live into their 80s or beyond will probably get the most out of the program by delaying benefits. Those with shorter life expectancies or little to no savings, on the other hand, may need to start earlier.
You can use the calculator in your My Social Security account to estimate how much you’ll receive from the program at various starting ages. Use this to help you decide when to enroll in benefits.
The three suggestions above aren’t the only ways to increase your Social Security benefit, but if you follow all three, you should be able to outperform the average $1,665 monthly check. Those who want to get the most out of the program should also look for ways to increase their income. Even a small raise today could result in significantly larger retirement checks later on.