No raise in your future? Try This To Increase Your Social Security Checks Instead | Smart Change: Personal Finances
Bigger paychecks today mean bigger Social Security checks in retirement — but that’s not exactly exciting news for those just getting by. Negotiating a raise or finding a new job may be good advice for some, but it’s not feasible for everyone. Luckily, these aren’t the only ways to boost your Social Security checks, either. Here is a strategy that most people can use with a high rate of success.
How Your Time in the Workforce Affects Your Social Security Checks
When calculating your Social Security benefits, the government takes into account your earnings during your working years, but it doesn’t always take into account everything your years of work, nor always all of your income.
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The Social Security benefit formula only takes into account the money you paid Social Security taxes on during your 35 most earning years, adjusted for inflation. Most people see their salary climb over the course of their career as they gain more skills and experience in their field.
As a result, many working over 35s receive more Social Security than they would have had they stopped at 35 or earlier. Their newest, highest-earning years begin to take the place of their lowest-earning early years in the calculation of their benefits, resulting in larger checks.
Even working just one extra year can have a significant effect on your benefits. If you earned $50,000, adjusted for inflation, every year for 35 years, your Social Security benefit based on the current formula would be $1,927 a month.
But if you worked a 36th year and earned $60,000 that year, your benefit would increase to $1,935 per month. It’s only an $8 difference, but it could add up to over $1,900 if you file for Social Security for 20 years. And if your income increases further over time or you choose to work longer, you could get even more out of Social Security.
The only people this may not work for are those currently earning less than when they started their career or some high earners. In 2022, you only pay Social Security taxes on the first $147,000 you earn. This limit was lower in previous years. Those earning more than the maximum income subject to Social Security taxes might enjoy their extra money today, but it won’t get them more benefit checks later.
Know the downsides of retiring too soon
Working past 35 can help boost your Social Security checks, but working fewer years could cost you dearly. If you only work 30 years, the government will add five years of no earnings to your benefit calculation. This can significantly reduce your checks. Even a year without income has a noticeable effect.
If someone earned $50,000 a year, adjusted for inflation, for 34 years — instead of the 35 years used in the example above — they would only receive $1,889 a month from Social Security. based on the current benefit formula. That’s $38 less per month, or more than $9,100 less over 20 years.
However, none of this means you have to work at least 35 years before retiring. It will always be your decision. But if you’re healthy enough to keep working and want to get the most out of Social Security, it’s worth sticking around until age 35. This way, at least you won’t have years without income that will weigh you down.
The $18,984 Social Security premium that most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help boost your retirement income. For example: a simple trick could earn you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.
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