Countless seniors wind up relying on Social Security to provide a chunk of their retirement income, if not the bulk of it. That’s why it’s crucial to take steps to raise those benefits to the greatest extent possible. With that in mind, here are three strategies for boosting your benefits — and getting more money out of Social Security when you need it.
1. File at 70
Though your Social Security benefits themselves are based on how much you earned during your working years, the age at which you file for them can cause your payments to go up, go down, or stay the same. If you claim benefits at full retirement age (FRA), you’ll get the exact amount you’re entitled to based on your earnings record — and for today’s workers, FRA is 66, 67, or somewhere in between. On the other hand, for every year you hold off past FRA, you’ll accrue delayed retirement credits that boost your benefits by 8% per year.
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You’re eligible to collect these credits up until age 70, at which point you might as well file for benefits. But if your FRA is 66 and you wait until 70 to claim Social Security, you’ll walk away with 132% of your original benefit amount each month. And that’s not a bad deal at all.
2. Tack on a few extra years to your career
We just glossed over the fact that Social Security benefits are earnings-based, but let’s get into detail a bit more. Specifically, your benefits are determined by applying a formula to your 35 highest years of earnings. In other words, if you worked for 45 full years, your 10 lowest-paying years don’t count.
Some people, however, don’t manage to work a full 35 years — namely, caregivers or those who take time off to raise children. If you’re missing a full 35 years of work, extending your career could be just the thing to raise your benefit payments — because for every additional year you work, you’ll replace a $0 in your personal formula with an actual income.
And another thing — if you’re making considerably more today than you did when you were younger, then it pays to capitalize on a few extra years of higher earnings. Imagine, for instance, that you only worked for 35 years, and that for five years during that period, you made $30,000 annually. If your current salary is $90,000, and you can replace a couple of years at $30,000 with an income three times as high, you’ll raise your benefits in the process.
Though job-hopping can make you look flaky, if you do it the right way, it can open the door to better career opportunities. But just as importantly, switching jobs enough during your career can end up boosting your Social Security benefits by virtue of helping you earn more.
Think about it: The typical company will give out raises once a year in a best-case scenario, unless you happen to get promoted, in which case you might qualify for an exception. Or not. Some employers, for example, make it a policy to only give out raises at the same time each year, even if you end up meriting one well before that point. On the other hand, if you move to a higher-paying job mid-year, you won’t have to wait on a raise.
How much of an increase might you snag by job-hopping? Legal Technology Solutions reports that in a healthy economy, you’ll average an 8% to 10% boost. Other data, however, shows that you might increase your earnings by as much as 20%. Not only that, but studies show that staying at the same company for more than two years could end up costing you 50% or more in lifetime earnings — and that could easily trickle down to your Social Security benefits.
Now this isn’t to say that you must up and leave your job every six to nine months. But it does pay to see what’s out there every couple of years or so, especially since more money translates to higher benefits down the line.
Even if you’re saving independently for the future (which you absolutely should be), it still pays to get the most money possible out of Social Security. The more you’re able to boost those benefits, the more comfortable a retirement you’re likely to enjoy.
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