I have over 30 years to go before I can even think about claiming Social Security, but that doesn’t mean it’s not on my mind. I understand that the decisions I make now determine the amount of my checks in the future, and I do everything I can to get the most out of the program. Here are three steps I’m taking to lock in important Social Security benefits in the future.
1. Keep working
I have already worked long enough to qualify for social security. I’ve earned over 40 credits in my career so far, where one credit is defined as $1,510 in revenue in 2022 and you can earn a maximum of four credits per year. But that doesn’t mean I have nothing to gain by continuing to work.
Besides the fact that I need a job to pay my bills, continuing to work is also boosting my future social security benefits. This is because the government bases your benefit on your average monthly income during your 35 highest earning years, adjusted for inflation.
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If I stopped working now, I could still apply for Social Security once I turn 62, but that would be pretty small. I haven’t worked 35 years yet, so I would have many years without income weighing on my average monthly income. By continuing to work, I replace those years without income with profitable years, which increases my average profit.
I can even work more than 35 years. If I do this, some of my early years of work earning minimum wage as a cashier at a grocery store will be replaced by my later, more earning years as a freelance writer.
2. I try to maintain a high income
Since I know that Social Security benefits are based on your earnings during your working years, I do what I can to keep my income high today. As a freelance writer, I have a little more control over my income than the average worker. But there are still things that traditional employees can do to increase their salary.
Working overtime or negotiating a raise can help. The same goes for switching employers if you find a company willing to pay you more. You can also start a side business if you have free time and a skill or service you want to share.
3. I’m saving a lot for my retirement so I can afford to delay Social Security benefits
Even if I could sign up for Social Security at 62, I probably won’t apply for it until I’m 70. That means skipping eight years of checks, but as a reward for that, when I sign up at age 70, my checks will be bigger.
Not everyone knows this, but the government assigns everyone a full retirement age (FRA) based on their year of birth. It is between 66 and 67 for today’s workers. You are supposed to wait until this age to register if you want to get all the benefits based on your work history. Each month you apply for benefits before your FRA lowers your checks a little, while each month you delay benefits increases your checks.
My FRA is 67 and if I delay until 70 I will get 124% of my full benefits by check. If I qualified for the current average monthly Social Security check of $1,665 to my FRA, I would receive about $2,065 per month at age 70. But if I claim right away at age 62, I’d only get 70% of my full benefits by check, or about $1,166 a month.
I expect to live to be 80 or 90, so even though I’ll get fewer years of benefits by delaying Social Security, I’ll probably get more money overall by doing so. Claiming a benefit of $2,065 for 15 years would give me a lifetime benefit of $371,700. That’s about $50,000 more than the $321,816 I would get if I claimed a benefit of $1,166 for 23 years.
But delaying benefits doesn’t make sense for everyone. And even those who want to sometimes struggle to cover their bills without Social Security help in the early years of retirement. That’s why I’m saving as much as I can for retirement right now. I want to have a big nest egg so I can pay all my basic expenses and defer Social Security until I’m ready.
Everyone is different, so my social security strategy may not work for you. But if you haven’t thought about when you’d like to apply or how you can increase your benefits, now is the time.
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