(ProsperNews.net) – Social Security benefits can be a crucial source of income for retirees, but many people unknowingly leave thousands of dollars on the table by not properly planning during their working years.
As of 2023, Social Security beneficiaries are eligible to receive around $1,827 every month, but there are ways to boost these benefits by another $1,800. In this article, we will discuss what you need to know to maximize your Social Security benefits and ensure you get the highest payout possible in retirement.
How are Social Security Benefits Calculated?
The size of the Social Security benefit you receive depends on your lifetime earnings and your full retirement age. This means that if you earned more and waited longer to claim Social Security, you will receive a bigger monthly check when you retire.
Social Security benefits are calculated based on your average indexed monthly earnings (AIME) over your 35 highest-earning years of work. The Social Security Administration (SSA) adjusts these earnings for inflation and applies a formula to determine your primary insurance amount (PIA), which is the monthly benefit you’ll receive if you start claiming Social Security at your full retirement age (FRA).
Your FRA depends on your birth year and ranges from 66 to 67 years old for those born in 1942 or later. However, you can claim as early as age 62, but your benefit amount will be permanently reduced.
How to Maximize Your Social Security Retirement Benefits
Social Security offers retirees a secure and reliable income, so you shouldn’t leave any money on the table. Here are three ways to max out your Social Security income.
Work for at Least 35 Years
Working more years is the first step in maxing out your Social Security paycheck. Your Social Security benefit is based on your average earnings over your 35 highest-earning years. If you have worked for fewer than 35 years, the years with no earnings will be factored in as zero, which can bring down your average. So, working for at least 35 years can help ensure that your benefit is based on your highest-earning years.
Maximize Your Earnings
The next lever to pull to get the maximum Social Security paycheck is earning more money. Your Social Security benefit is based on your earnings. So, the more you earn and pay to Social Security, the higher your benefit will be, up to a point.
Social Security taxes your income at 6.2% every year. Paying your taxes on the maximum secures you the highest possible Social Security payout. You can also work during retirement to increase your payout, as your earnings during retirement go on your record. You can take on consulting jobs, invest in real estate or stocks, or work in a high-paying job to maximize your earnings.
Delay Your Benefit
Choosing the right time to claim Social Security benefits can significantly affect your payout. You can claim as early as age 62, but your benefit will be reduced if you start before your full retirement age (FRA), which is currently 66 or 67, depending on your birth year. If you’re looking for a bigger payout, wait as late as 70, but waiting beyond that won’t get you anything more.
Delaying your benefits past your FRA can increase your benefit amount by up to 8% per year until age 70, which is $4,555 as of 2023. You’ll also get another “raise” with the cost-of-living adjustment (COLA). Those who paid the taxable maximum their entire working lives and waited to claim their benefits at the full retirement age had a starting payout of $4,194 in 2022.
Bottom Line
Maximizing Social Security retirement benefits is crucial to ensuring a comfortable retirement. However, it’s important to remember that Social Security benefits should be just one part of your overall retirement planning strategy.
Working with a financial advisor and staying informed can help you develop a comprehensive plan that takes into account your unique goals and circumstances and ensures that you’re on track to achieve a financially stable retirement.
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