3 Social Security Secrets to Even Bigger Checks | Smart Switch: Personal Finance

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Psst! Guess what? You may just be assuming your Social Security checks will be what they are and you can’t control how big they are. If so, you are wrong. There are many ways to increase those benefits, especially if retirement isn’t around the corner.

For example, you can check your earnings record with the Social Security Administration once you set up a “my Social Security” account. That information is used to calculate your benefits, so make sure it’s correct. Here are three other effective ways to reinforce those benefits.

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1. Work at least 35 years

The formula Social Security uses to determine how much money to send you each month in retirement takes into account your earnings from the 35 years in which you earned the most (with each year’s earnings adjusted for inflation). So if you only work, say, 28 years before you retire, there will be seven zeros in the equation, and that will result in a much smaller benefit amount than it could have been.

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2. Work for more than 35 years

Also, obviously, the more you earn during your working life, the higher your benefits, up to a point. Let’s say you worked for those 35 years and are thinking of quitting now, as you approach age 62, the earliest age you can claim benefits. Well, if your early years included a lot of part-time work, or if your earnings were low then, those low numbers will affect your benefit check. It’s the same if you made a reasonable, fairly average income in your first few years on the job, but now you’re earning much more than ever, even on an inflation-adjusted basis.

In those cases, you may be able to significantly increase your future benefits by working a few more years. For each additional year you work, earnings from the year with the lowest earnings will be removed from the calculation. Remember: only the highest earning 35-year-olds count.

You can even be very proactive about it and work aggressively to increase your income for a few years, perhaps by taking a side job, getting a better-paying position, or switching to a more lucrative profession.

3. Delay in starting to collect your benefits

Finally, another powerful strategy to increase profits is the following: Delay the moment you start collecting benefits. Each of us has a “full retirement age” at which we can start collecting complete benefits to which we are entitled. For most of us, it’s 66, 67, or somewhere in between. But we can start collecting Social Security retirement benefits as early as age 62. The problem is that they will be smaller than if we started cashing later, but this way we will cash a lot more checks.

We may also delay the start of collection of our benefits. For every year we spend beyond our full retirement age and up to age 70, our benefits will increase by approximately 8%. So waiting between ages 67 and 70 can make our checks 24% larger. Keep in mind, however, that if we’re late, we’ll end up cashing fewer checks. The system is actually designed so that it doesn’t matter when we start collecting if we live an average life.

Still, there are plenty of good reasons to delay, if we can. For starters, if we’re in good health and have a decent chance of living a longer-than-average life, we’ll come out on top. Also, if we’re married and earn more in the family, then it may be smart to maximize our benefits because when one spouse dies, the other can collect either benefit, whichever is higher, and that can really help the spouse. of lower income.

The last consideration is inflation and the cost of living adjustments (COLAs) that Social Security beneficiaries receive in most years. The higher your benefit, the higher your annual increase.

It may be worth reading up on Social Security and making some smart moves, both now and later. If you do, you may end up with a more financially secure future.

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