For countless older Americans, Social Security stands as a foundational component of their financial wellbeing during retirement. Despite its importance, a significant portion of retirees rely exclusively on Social Security payments, and these benefits may not always meet their financial needs.
According to estimates from the Social Security Administration, the average monthly retirement benefit reached $2,071 in recent calculations. This figure already reflects the 2.8% cost-of-living adjustment applied this year, aiming to maintain retirees' purchasing power amid inflation.
Individuals interested in augmenting their Social Security income beyond this average level should consider several key approaches. These strategies center on maximizing the factors Social Security uses to compute benefit amounts, primarily through ensuring a substantial work history, enhancing lifetime earnings, and smartly timing benefit claims.
Commit to a Full 35-Year Work Record
The calculation of Social Security retirement benefits is primarily based on your highest 35 years of earnings. When a worker’s history falls short of 35 years, the missing years are factored in as zero earnings, which can significantly reduce monthly payments upon retirement.
Therefore, aiming to work for at least 35 years, even if some of those years involve part-time employment, is crucial. For instance, if you enter your 60s with a 32-year work background, dedicating three additional years to any form of gainful employment—even on a part-time basis—can enhance the earnings history used to compute your benefits. This extension not only increases your potential monthly payout but may also provide a smoother transition into full retirement.
Enhance Your Lifetime Earnings
Another avenue to improve Social Security benefits is to increase your annual income, as higher earnings generally lead to larger benefit amounts. While boosting income might be challenging, opportunities such as overtime work or taking on supplementary jobs are practical ways to raise total earnings.
Additionally, developing skills that command better compensation can contribute to a higher paycheck over time. Whatever the method, a larger cumulative income base throughout your career positively influences Social Security payments.
Consider Delaying Benefit Claims Until Age 70
Retirees typically become eligible for Social Security benefits without reduction at their full retirement age, which for individuals born in 1960 or later is 67. However, delaying benefit claims beyond full retirement age up to age 70 can yield an 8% increase per year in monthly payments.
This approach requires careful planning, as working until age 70 might be necessary to maximize benefits, or alternatively, ensuring sufficient savings to support expenses in the years before benefits begin. Those seeking to leverage delayed claiming must assess their health, employment feasibility, and financial resources to determine if postponing benefits aligns with their retirement goals.
Conclusion
Although the average Social Security benefit today may appear reasonable, retirees aiming for larger monthly payments should focus on three principal strategies. Maintaining at least a 35-year working record, striving to raise overall earnings during one's career, and postponing benefit claims up to age 70 collectively contribute to exceeding average Social Security checks and enhancing retirement financial security.