Social Security makes up one of the legs of the three-legged stool that’s supposed to provide support throughout your retirement. Since the other two legs are pension funds and savings — and many people don’t have a pension and have saved too little — Social Security may be the most important leg.
If income from Social Security is going to be a major source of funds in your later years, you’ll want to do all you can to get the largest benefits possible. But how can you do that? Just follow these four tips.
1. Negotiate your raises
The amount of your Social Security benefit is directly related to the amount of money you earn during your lifetime. In fact, benefits equal a percentage of average wages, after adjusting for inflation. Because of this, a higher income during your lifetime translates to more money from Social Security when you retire.
One of the best ways to raise your income during your working life is to simply ask for more money.
You’ll want to negotiate your salary when you start a new job and during periodic performance reviews to make sure your employer is paying what you’re worth. And if your employer isn’t receptive, compare your salary with market data on what others in your position are making. If you find you’re getting below-market rates, a change in jobs may be in order.
2. Don’t quit work too early
When Social Security determines your average wage for purposes of setting the size of your benefit checks, it doesn’t just factor in every single year you worked. Instead, your average wage is calculated based on salary data from the 35 years your earnings were highest.
If you quit work prior to putting in 35 years on the job, some years when you earned $0 will be included in the calculation. This can bring your entire average down. Quitting work when you’re earning a lot will also reduce your average wage, since each year of high earnings could become one of the 35 years that count in determining your benefit.
For many people, quitting work and retiring also necessitates claiming Social Security benefits ASAP — unless you have enough savings to live on. But while you can start your Social Security checks as early as age 62, waiting until 70 would result in the largest monthly check. Even if you don’t want to wait that long, each year you delay results in a bigger monthly income up until age 70 because of the way the program works.
3. Know the rules for spousal and survivor’s benefits
Sometimes, your own work record won’t produce a very high benefit, either because you didn’t earn very much or because you didn’t work very long. The good news is, you may be able to have your benefit amount based on a current or former spouse’s earning record.
Spousal or survivor’s benefits could be available to you if you’re married now or got divorced after a marriage lasting at least 10 years. If there’s a possibility these benefits could be higher than your own, research the amount you’d receive and what you need to do to claim them.
If you’re married as you near retirement age, you may also want to coordinate with your spouse on a Social Security claiming strategy that makes sense. For example, it may be smart for the lower-earning spouse to claim benefits ASAP to provide income to live on, while the higher earner delays as long as possible to raise the amount of the survivor’s benefit.
4. Consider relocating to a state that won’t tax your benefits
If you’re already nearing retirement or have claimed your benefits already, one of the best ways to boost your Social Security checks is to increase the amount of your benefits you get to keep.
If you live in one of the states that taxes Social Security benefits and you’re subject to this tax, a move to a different locale could give your income a serious boost. There are currently 37 states that don’t tax Social Security benefits and soon there will be 38. Pick one you like and relocate there.
Maximizing your Social Security is a smart move for most retirees
Stanford experts recommend waiting until age 70 to claim Social Security benefits because they’re such a reliable source of retirement funding. But delaying isn’t the only way to max out your benefits.
If you aim to earn more throughout your life, you make sure you coordinate with your spouse, and you avoid having to pay state taxes, these steps will also go a long way toward getting checks that can provide you with meaningful income as a retiree.
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