Social Security continues to be an important part of a retiree’s finances, but with rising costs it does not pay for as much as it used to. But with careful planning there are some ways to maximize your Social Security benefits at retirement.
The Social Security Administration (SSA) calculates your benefit based on your average earnings over the course of your career. It takes your 35 highest-earning years after adjusting for inflation. Only earnings up to the annual wage base limit count toward your Social Security calculation.
The SSA also looks at when you claim Social Security benefits. You are entitled to start receiving monthly checks as early as age 62 but if taken then you will receive a smaller benefit. Waiting past full retirement age — which ranges between 66 and 67 depending on your year of birth, will earn you delayed retirement credits that will boost your monthly check.
Put this all together, and there are three things you can do to max out your Social Security benefits:
- Work for at least 35 years.
- Earn at least the maximum wage base amount in those 35 years.
- Do not claim your benefits until you turn 70, the age at which delayed retirement credits stop accruing.
For example, if you followed this formula and retired in 2021 at age 70, you would receive a Social Security payment of $3,895 a month, considerably more than the average of $1,543 that is received by a typical recipient.
Obviously, many people will have earnings that are far less than the Social Security wage base limit. Even if that is the case, you can still do much to get the biggest monthly Social Security payment possible. The steps that you take can play a big role in how secure your retirement is.