Personal finance and retirement experts highlighted a strategy that could possibly increase Social Security benefits significantly by up to $11,664 a year. Millions of older adults rely on Social Security once they retire, with about 37% of men and 42% of women in 2023 depending on their benefits, according to the Social Security Administration.
The age at which a recipient begins to claim payments greatly affects a person’s Social Security benefits. After the age of 62, filers can apply for Social Security, but they must wait until they hit their full retirement age, which depends on their birthday. The key is to wait to collect benefits until after hitting the full retirement age, which can be up to age 70.
The important social security report SSI
As reported in March by the Social Security Administration, the average retired recipient collects about $1,800 per month from benefits. Assuming that is the amount collected prior to one’s full retirement age, the monthly payment would reduce by 30%, resulting in $1,260 per month. However, waiting until age 70 means collecting $1,800 per month and a 24% bonus.
This will ensure older adults can collect their full benefits and an additional bonus of at least 24% per month. By delaying, older adults can collect $2,232 per month, which can add up to $11,664 in a lifetime. Experts advise that there are specific situations in which collecting benefits early will be the right decision, such as being forced into an early retirement or dealing with health problems.
Strategies to obtain the highest Social Security benefit
Social Security benefits are calculated based on your 35 highest-earning years. If you have fewer than 35 years of work, the Social Security Administration (SSA) will factor in years with zero income, which could significantly lower your benefit. Therefore, working for at least 35 years could help maximize your benefit.
As the SSA uses your highest-earning years to calculate your benefit, the more you earn (up to the yearly maximum taxable earnings), the higher your benefit will be.
You can start claiming Social Security benefits at age 62, but doing so will reduce your monthly benefit. If you wait until your FRA (which ranges from 66 to 67 depending on when you were born), you’ll receive 100% of your monthly benefit. If you can wait even longer, your benefit will increase by a certain percentage for each year you delay, until age 70.
If you’re married, divorced, or widowed, you might be eligible for spousal or survivor benefits, which could be higher than what you’d receive based on your own work record. Minimize Social Security taxes: Depending on your income in retirement, your Social Security benefits may be subject to federal income tax. To minimize these taxes, you might consider strategies such as converting a traditional IRA to a Roth IRA, which could lower your taxable income in retirement.
Your Social Security benefits are based on your earnings record, so make sure it’s correct. You can do this by creating a “my Social Security” account on the SSA’s website.
Social Security rules can be complex, and the best strategy for you can depend on many factors, including your health, life expectancy, and personal financial situation. You might want to consult a financial planner or other professional who is knowledgeable about Social Security.
What are the benefits of working for at least 35 years?
Working for at least 35 years in the Social Security system has several benefits:
- Higher retirement benefits: Your highest-earning 35 years of work history are considered when calculating your monthly retirement benefit. The higher your earnings over those 35 years, the greater your contribution to the program through FICA taxes, and the higher your benefit will be.
- Replacing zero years: If you have fewer than 35 years of earnings, the SSA uses zero for some years when calculating your retirement benefits. Continuing to work displaces these zeroes, which can result in a higher benefit than if you had stopped working.
- Increasing AIME: Each year of work after reaching full retirement age (currently 66) can result in an increase in your AIME (Average Indexed Monthly Earnings), potentially leading to higher future benefits