Seniors must replace around 80% of pre-retirement income (or more) if they want to maintain their quality of life after leaving the workforce. Social Security benefits alone can’t do that, since they’re designed to replace around 40%.
While you can’t rely solely on Social Security, you can boost your benefits. Unfortunately, around 90% of Americans don’t know how to maximize monthly retirement income. You don’t have to be one of them.
1. Claiming benefits on a spouse’s work record
If your spouse was the higher earner, you may get more money from Social Security if you claim either spousal or survivor’s benefits instead of claiming benefits based on your own work history.
Spousal benefits could be as high as half your spouse’s full benefit, while survivor benefits could equal up to 100% of the deceased worker’s benefit.
You can even access these benefits if you are divorced — provided your marriage lasted at least 10 years. Unfortunately, many retirees are unaware of this, or don’t realize they can get spousal or survivor benefits even if they worked themselves.
2. Working longer than 35 years
Social Security benefits are calculated based on a 35-year work history (although you can claim them even with a much shorter work record).
If you don’t put in 35 years, your benefit will be reduced. That’s because your benefits equal a percentage of your career-average wages during the 35 years you earned the most (after adjusting for inflation).
Staying on the job for a shorter time means some years of $0 wages will be part of your average. But quitting work after exactly 35 years could mean passing up the chance to boost your benefits. See, if you’ve increased your salary over the years, your current income could be higher than during earlier points in your career (even after adjusting for inflation).
Each extra year you work at that higher salary will become one of the 35 crucial years determining your average wage — and a lower-earning year will be pushed out.
3. Delaying your benefits claim
Finally, delaying a claim for benefits could also increase the size of your Social Security checks.
The earliest eligibility age is 62. Delaying past that until full retirement age, or FRA (between 66 and 2 months and 67) enables you to avoid early filing penalties. These penalties result in a 6.7% reduction in benefits for each of the first three years benefits start ahead of your FRA and another 5% reduction for each prior year. A retiree born in or after 1960 who has a full retirement age of 67 would see a 30% cut to benefits if they don’t delay until FRA.
But while you could claim at FRA without a reduction in benefits, it may make more financial sense to wait even longer — until 70. That’s because delayed retirement credits are available until then. These raise your benefits by 8% annually for each year you wait. Both early filing penalties and delayed retirement credits apply for each month you’re early or late, so you don’t even have to wait a full year to have some effect.
Of course, if you wait, you’ll get fewer checks over your lifetime — so make sure your higher monthly payments make up for income lost by not claiming early. Calculating your break-even point will help you see when that will happen.
Ultimately, you’ll need to decide if working longer or waiting to claim benefits is worth the extra money — and you’ll need to learn the rules for qualifying for spousal or survivor benefits. Once you understand the implications of these decisions, you can make the right moves when it comes to your retirement income.