Social security can seem like a straightforward program on its surface. Beneath that surface, the specific rules it follows mean that no one – not even Social Security itself – can tell you exactly what your benefit will be before you actually apply to receive it. In addition to your earnings, when you apply, your age plays a key role in determining exactly what your benefit will be.
Fortunately, while the details are difficult to determine, there are general principles you can follow to increase the size of your monthly benefit once you have collected. With that in mind, here are four social security secrets to getting even bigger checks.
Nr. 1: Postpone the application until you are closer to 70 years old
You can start collecting pension benefits from social security schemes as young as you are 62 years old. The longer you wait to start collecting until age 70, the higher your monthly benefit check will be. The difference can be significant.
As of January 2022, the average retiree receives $ 1,660.90 per month in benefits. Suppose for a moment that you were born in 1960 or later and that the amount represents your full expected retirement age. By waiting until the age of 70, your monthly benefit can be as much as $ 2,059.52. On the other hand, if you collect at 62 – the earliest age you can – your benefit will be reduced to $ 1,162.63.
It’s a big fluctuation, definitely determined by your age when you start collecting checks. The trade-off, of course, is that the later you wait to pick up, the fewer months you get your benefit. Whether it is worth it for you to wait or not depends on how long you expect to live, how well your health will hold along the way, and how you cover your costs before you pick up.
Nr. 2: Work a few more years
Social security uses the highest adjusted 35 years in your earnings to determine how big your benefit will be. If you work less than 35 years, some years in your record will be $ 0. If you work for more than 35 years, then your high income years will overwrite the lower income years and thus increase your benefit. Especially if your late pay is higher than your early career pay was, the extra few years of higher earnings can make a significant difference in your total benefit amount.
In addition to the social security boost, these incomes can help you increase the amount of money you have saved up for retirement. Plus, by working a few more years, your nest egg does not have to cover your costs for that long, which can improve its ability to cover your costs in your golden years.
Nr. 3: Earn a little more
The more you earn each year (up to a ceiling of $ 147,000 by 2022), the higher the benefit you will qualify for. If you are eligible for overtime at your job, it can be a good source of higher earnings. Otherwise, a side concert can also increase your income. Alternatively the Great Resignation is a real thing these days – and many people who quit their jobs do so to seek higher incomes from other employers.
Note that there is no direct dollar-for-dollar connection between what you earn at work and what your benefit will be. Social Security uses inflection points in its formula. These bending points mean that at higher income levels, you will see a slower increase in the benefit you receive for the next dollar you earn than you would at lower income levels. Still, every little bit helps, and in addition to the higher Social Security benefit, the higher the income you earn, the better your chance of saving some of it as well.
Nr. 4: Keep your other income sources down in retirement
This is not about receiving major social security checks, but it is about ensuring that you are able to keep as much of what you receive as you can. One way this matters is that your social security benefit may in itself be taxable, depending on your total earnings.
As much as 85% of your social benefit can be taxed if:
- You are married and filing separately,
- You are single and have a total income of over $ 34,000, or
- You are married and have a total income of over $ 44,000.
The total income figure takes into account your adjusted gross income, your non-taxable interest income and half of your social security benefit.
Another way it matters is because your Medicare Part B premiums are based on your income level from two years before. In 2022, the standard premium for Medicare Part B is $ 170.10 per share. per month, but it can rise to as much as $ 578.30 per month. month depending on your 2020 income level.
People who receive both Social Security and Medicare benefits typically receive their Medicare Part B premiums deducted from their Social Security benefits. As a result, keeping your income low enough to stay out of the higher Medicare Part B premium levels can go a long way toward protecting what you keep from your Social Security benefit.
Put your plans in place today
While all four of these strategies can help you earn or keep a higher check of benefits, they each require some prior planning to perform successfully. So get started now and put your plans in place today to maximize the value of your available social security benefit.