The average monthly Social Security benefit in 2021 is ,543, so itâs not going to buy you a luxurious retirement. But those monthly checks can certainly make your golden years more comfortable.
Most people will have to make do with much less than the maximum benefit. The less you can rely on Social Security, the more comfortable youâll be. If youâre still working, the best thing you can do is keep socking away as much as you can in a retirement account.
7 Ways to Maximize Your Social Security Benefits
If your current or ex-spouse dies, you could qualify for 100% of their benefit, including any delayed retirement credits they earned. However, you canât earn those 8% credits by waiting past your own full retirement age to claim.
Once you reach full retirement age, your earnings wonât affect your benefits.
1. Work at least 35 years.
Probably not. The maximum Social Security benefit in 2021 is ,895. But very few people will actually get that amount. To get that much, youâd have to earn the maximum salary for the year (2,800 in 2021) for 35 years and hold out until 70.
We get it: If only you could snap your fingers and suddenly make more money. But weâre just explaining the rules here. If youâre able to find a better-paying job or boost your earnings with part-time or freelance work, youâll get more money out of Social Security.
2. Earn more money.
So if your full retirement age is 67 and your spouseâs full benefit is ,000 a month, youâd qualify for a ,000 a month spousal benefit if you started at 67. If you took benefits a year early, youâd get 4 a month, because youâd reduce your benefits by 6.66%. You canât get those delayed retirement credits of 8% per year based on a spouseâs record, though, so youâll get your maximum benefit at your full retirement age of 66 or 67.
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3. Report all your earnings.
One thing we want to make clear, though: Donât count on Social Security cost-of-living adjustments to make much difference. Benefits increase at a snailâs pace compared to the actual costs of living for senior citizens. The most recent Social Security COLA was an anemic 1.3%.
4. Wait as long as you can to take benefits.
Deciding when to take Social Security is a complicated piece of retirement planning. Some people opt to start benefits sooner and take smaller checks, while others try to hold out for the biggest check. If youâre in the latter camp, weâll discuss some strategies for how to maximize your Social Security benefits.
If youâre a regular W-2 employee, you donât have to worry about reporting your earnings to Social Security because your employer handles that and also deducts the payroll taxes that fund Social Security and Medicare on your behalf. But if you underreport income you earn from tips, freelancing or self-employment, youâre not just putting yourself at risk of troubles with the IRS. You could reduce the amount of Social Security you get later on.
If you donât qualify for much Social Security based on your own record, you may be eligible for more based on your spouseâs record. You can get up to 50% of your spouseâs full retirement benefit once you reach your full retirement age provided that youâve been married for at least a year.
5. Avoid taking benefits early if youâre still working.
Up to 85% of your Social Security benefits are taxable, depending on your income. Saving in a Roth IRA is a good way to limit your tax bill since distributions wonât count as taxable income.
- $1 for every $2 you earn above $18,960 until the year you reach full retirement age.
- $1 for every $3 you earn above $50,520 the year you reach full retirement age until your birthday.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
6. Marry someone who qualifies for a bigger benefit.
If you claim your benefits and then regret it, you need to act fast. Social Security lets you withdraw your application if itâs been less than 12 months since you started your benefits. Youâll have to repay everything you received, including taxes and Medicare premiums that were withheld.
Social Security uses your 35 highest-earning years to calculate your benefit.
You can take benefits as early as age 62. But every year you claim before your full retirement age reduces your benefit by 6.66%. Once you reach full retirement age, you can also wait even longer. Youâll get an extra 8% delayed retirement credit for each year until you hit 70. At that point, delayed retirement credits stop. Waiting until you reach age 70 can result in a monthly benefit thatâs 77% higher than if you claimed at 62.
Weâre going to be honest: There are no easy shortcuts that will get you more Social Security. Any strategy that will boost your benefit boils down to: Work longer. Earn more money. Wait as long as possible.
7. Stop your benefits if you claimed them too soon.
If your retirement funds are lacking, delaying Social Security payments for as long as possible is one of the best things you can do. Full retirement age is the age when you qualify for 100% of your benefit. For most workers, itâs between 66 and 67, depending on when you were born.
If you take Social Security early while youâre still working, your benefits will be reduced by the following amounts in 2021:
Can You Get the Maximum Social Security Benefit?
Once youâve reached your full retirement age, you can suspend your benefits to earn 8% delayed retirement credits. Youâll be able to restart them for a higher amount whenever you want. Social Security will automatically resume your payments once youâre 70.
You typically need the equivalent of 10 years of full-time work to qualify for Social Security. But youâll get the highest benefit if you stay on the job for at least 35 years.
Divorced? If youâre not remarried, you could claim benefits based on your exâs record under the above rules, provided that your marriage lasted at least 10 years. (No, you wonât affect their benefits.)
Thereâs a limit, though. Social Security has an earnings cap. Money that you make above that amount isnât taxed, and it also doesnât affect your future benefits. In 2021, Social Security only taxes the first 2,800. If you make 0,000 or even million, Social Security will still consider your income 2,800 for the year.
If you only worked 32 years, theyâd use your 32 years of earnings plus three zeroes to get your 35 years. Working more than 35 years can pay off if youâre making significantly more than you were in your early career because you get to replace some of those low-earning years with higher wages.