Maximizing your Social Security benefit from the get-go is a smart move to protect the longevity of your savings. After all, the more you collect from the feds, the less you have to pull from your retirement portfolio. Plus, starting from a higher base makes those percentage-based cost-of-living adjustments worth more to you over time.
Here are two income-boosting strategies to consider. Either can raise the average worker's monthly benefit by more than $800.
1. Delay your Social Security application
The first thing to know is that you are eligible for your full Social Security benefit when you reach full retirement age (FRA), an age assigned to you based on your birth year. Filing for Social Security before FRA reduces your monthly benefit and filing later than FRA increases your monthly benefit.
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Here's how the reduction for filing early works. A reduction is applied to your full benefit based on how many months your filing precedes your FRA. If you file no more than 36 months prior to reaching FRA, your benefit is reduced by five-ninths of 1% for each month you're early. For any months in excess of 36, the reduction is five-twelfths of 1% monthly.
Let's put some numbers to that formula. Say you're 50 today and your FRA is 67. You plan to claim at 62 -- which is 60 months prior to your FRA. Your benefit reduction for the first 36 months is 20%, calculated as five-ninths of 1% multiplied by 36. You'd then add another 10% to that reduction for the remaining months, calculated as five-twelfths of 1% multiplied by 24. That's a totalbenefit cut of 30%.
You can avoid the 30% cut simply by waiting until your FRA to claim Social Security benefits. But if you're willing to delay your claim past your FRA, you qualify for delayed retirement credits -- which can also be significant. For every month you postpone your claim beyond FRA, your benefit is increased by two-thirds of 1%. Those credits stop accumulating at age 70. So, if you're 50 today with an FRA of 67, you could delay your claim by up to 36 months. That earns you a benefit increase of 24%.
Now, let's translate those percentages into real numbers. The table below shows estimated benefits in today's dollars at different claiming ages for a beneficiary who is 50 today. The benefits are calculated by Social Security's quick calculator.
Current Salary | Estimated Benefit at 62 | Estimated Benefit at FRA | Estimated Benefit at 70 | Difference Between Benefits at Age 62 vs. 70 |
|---|
$40,000 | $1,043 | $1,537 | $1,940 | $897 |
$45,000 | $1,123 | $1,657 | $2,093 | $970 |
$50,000 | $1,202 | $1,777 | $2,247 | $1,045 |
$55,000 | $1,282 | $1,897 | $2,400 | $1,118 |
$60,000 | $1,361 | $2,016 | $2,553 | $1,192 |
Data sources: SSA.gov, author calculations.
The righthand column shows the upside of delaying your Social Security claim from age 62 to age 70. If you're earning $50,000 today, the eight-year postponement could increase your monthly income by more than $1,000.
2. Increase your income
You may not love the idea of putting off retirement until your 70th birthday. That's understandable. Of course, you have the option to delay Social Security for a year or two in return for a smaller benefit increase. But you could also raise your benefit by increasing your income today.
Your Social Security benefit at FRA is based on your average inflation-adjusted monthly income during your highest-paid 35 years of working. If you are 50 today, you have more than a decade to increase that average by adding higher-income years to your work history. Each year of higher income earned going forward will replace a year of lower income in that 35-year calculation.
The potential increase to your benefit through higher income is not as fruitful as simply waiting -- but why not find a middle ground by combining both strategies? For example, say you pick up a side job to increase your current income from $50,000 to $60,000 annually. That raises your benefit at 62 by an estimated $159 monthly. If you also waited until FRA to claim your benefit, the cumulative monthly increase goes up to $814. Plus, you'd then have the option to keep your secondary income after you leave your full-time role, which adds even more financial flexibility.
Be strategic about Social Security
Only you can decide when to file for Social Security. Delaying your claim benefits you financially, but not everyone wants to work until age 70. In that case, find opportunities to increase your wages now while you're still working. That'll help increase your Social Security benefit and, hopefully, give you the flexibility you need to retire as soon as it feels right.
FAQs
There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
How to boost your Social Security in retirement by at least $100,000? ›
Below are the nine ways to help boost Social Security benefits.
- Work for 35 Years. ...
- Wait Until at Least Full Retirement Age. ...
- Sign Up for Spousal Benefits. ...
- Receive a Dependent Benefit. ...
- Monitor Your Earnings. ...
- Watch for a Tax-Bracket Bump. ...
- Apply for Survivor Benefits. ...
- Check for Mistakes.
The number of credits you need to receive retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (10 years of work). If you stop working before you have enough credits to be eligible for benefits, the credits will remain on your Social Security record.
At what age is Social Security no longer taxed? ›
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Is there really a $16728 bonus for Social Security? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
What is the Social Security 5 year rule? ›
The Social Security five-year rule is the time period in which you can file for an expedited reinstatement after your Social Security disability benefits have been terminated completely due to work.
How do you get extra money added to your Social Security check? ›
Additional work will increase your retirement benefits. Each year you work will replace a zero or low earnings year in your Social Security benefit calculation, which could help to increase your benefit amount. Social Security bases your retirement benefits on your lifetime earnings.
How to get higher Social Security payments? ›
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.
How much Social Security will I get if I make $80,000 a year? ›
Here's the starting benefit for each of those same final annual incomes, if you wait until age 70: Final pay of $80,000: benefit of $2,433 monthly, $29,196 yearly. Final pay of $100,000: benefit of $2,811 monthly, $33,737 yearly.
What is the Social Security 3 year rule? ›
The rules are as follows: Before age 24 - You may be eligible if you have 6 credits earned in the 3-year period ending when your disability starts. Age 24 to 31 – In general, you may be eligible if you have credit for working half the time between age 21 and the time your disability began.
The maximum Social Security check
Your maximum benefit if you file at full retirement age – between 66 and 67 – is $3,822 per month. Your maximum benefit if you file at age 70 – the age when extra benefits stop accruing – is $4,873 per month.
Can I get a tax refund if my only income is Social Security? ›
You would not be required to file a tax return. But you might want to file a return, because even though you are not required to pay taxes on your Social Security, you may be able to get a refund of any money withheld from your paycheck for taxes.
When a husband dies, does his wife get his Social Security? ›
Social Security survivors benefits are paid to widows, widowers, and dependents of eligible workers. This benefit is particularly important for young families with children.
At what age is 401k withdrawal tax free? ›
Once you reach 59½, you can take distributions from your 401(k) plan without being subject to the 10% penalty. However, that doesn't mean there are no consequences. All withdrawals from your 401(k), even those taken after age 59½, are subject to ordinary income taxes.
Do you pay income tax after 70 years old? ›
If Social Security is your sole source of income, then you don't need to file a tax return. However, if you have other income, you may be required to file a tax return depending on the amount of other income.
Who is eligible for the Social Security bonus? ›
There is no specific “bonus” retirees can collect from the Social Security Administration. For example, you're not eligible to get a $5,000 bonus check on top of your regular benefits just because you worked in a specific career. Social Security doesn't randomly award money to people.
Who qualifies for an extra $144 added to their Social Security? ›
You must be enrolled in Original Medicare and pay your Part B premiums without state or local financial aid to be eligible for the giveback. Only some Medicare Advantage Plans offer this benefit, and in select service areas.
Who qualifies for the $1657 Social Security check? ›
To receive SSI, one must meet two eligibility requirements. One must either be over the age of sixty-five, blind and/or disabled. Additionally, they must have a limited income and resources as the program is need-based and aims to assist beneficiaries to cover basic costs for food and shelter.
