For millions of retired individuals, Social Security is a crucial part of their income. According to the Social Security Administration, about 37% of men and 42% of women depend on these benefits for at least half of their retirement income. Yet, as of April 2023, the average benefit for a retired worker is roughly $1,835 per month, or slightly more than $22,000 annually. Unfortunately, this may not be enough for many retirees to comfortably live on, given the rising cost of living.
However, here’s the silver lining: your Social Security benefit isn’t a fixed number. If you’re aiming to surpass the average benefit, you can consider three key strategies. Your Social Security benefits are calculated based on the average income from your top 35 earning years. This average is then adjusted for inflation to determine your primary benefit amount.
Average $1,835 social security benefit and how to get more money
If you retire before completing 35 working years, your benefit could be lower. However, even if you’ve worked 35 years or more, choosing to work a bit longer can boost your payments. It’s likely that you’re earning more now than you did at the start of your career. The more you work during these higher earning years, the greater your average earnings will be, which translates to larger benefits.
A higher income, even a modest increase, can lead to larger monthly benefits. But bear in mind, there’s an income cap that affects your benefit. This cap is adjusted annually for inflation, and in 2023, it’s set at $160,200. Earning up to this limit can enhance your benefit amount, but exceeding the limit won’t bring additional increases.
The maximum benefit amount in 2023 is $4,555 per month. To reach this, you’d need to consistently hit the earnings limit throughout your career. However, even if you’re far from this limit, striving to get as close as possible will still bolster your benefits.
Postpone Claiming Benefits
One of the simplest and most impactful ways to enhance your monthly benefits is to delay your Social Security claim. You can start claiming benefits from 62 years old, but the sooner you claim, the smaller your payments will be. The benefit amount you receive based on your work history is what you’d collect if you file at your full retirement age (FRA), which is 67 years old for anyone born in 1960 or later.
If you claim at 62, your benefits would be permanently reduced by up to 30%. However, if you wait until you’re 70, you’ll get your basic benefit plus a monthly bonus of at least 24%.
Reaching for Larger Checks
You don’t necessarily have to execute all three strategies to boost your benefits. Even small changes can make a big difference. For instance, if you can’t postpone Social Security until 70, waiting an extra year or two can still significantly increase your monthly payments. Similarly, you might not hit the $160,200 earnings limit, but even a minor increase in your income can help.
If you’re planning to rely on Social Security during retirement, it’s a wise move to strategize and maximize your benefits. With the right plan, you might be able to receive more than you initially anticipated.
Benefit cuts might be coming: How can you protect your retirement benefits
Don’t panic: The Social Security system is not bankrupt, but cuts to benefits could be coming by 2024. As discussions surrounding potential benefit reductions intensify, you’ve got to explore strategies that can help protect and maximize your retirement income.
First, consider beefing up your savings. While it may seem challenging, even small contributions can make a significant impact when invested wisely. Start, for example, by adding $150 a month to your retirement fund, and bring that amount to $300 when possible. If you stay constant on that $150, you’ll add up to $18,000 in a decade, and you can double it to $36,000 if you get to save $300 a month. Considering the average retiree collects around $22,000 annually from Social Security, an extra $50,000 in savings could cover more than two years’ worth of benefits.
Afterward, you could aim for a bigger benefit amount: The Social Security Administration (SSA) calculates your benefits based on the average of your income during the 35 highest-earning years of your career. This average is then adjusted for inflation to determine your basic benefit amount, which you’ll receive at your full retirement age (FRA). To increase your benefits, strive to work a full 35 years before claiming them. Any years with no earnings are factored in as zeros, resulting in a lower payment.
Delaying Social Security benefits is also a valid strategy to maximize your monthly payments. While you can claim benefits as early as age 62, doing so will result in a permanent reduction of up to 30% from your basic benefit amount. However, if you delay filing until age 70, you will receive your basic benefit amount plus a bonus of at least 24% per month. By filing at 62, your benefit would be reduced to $1,260 per month. Yet, if you wait until age 70, you’ll receive a 24% bonus, totaling $2,232 per month.