3 Social Security Secrets for Bigger Checks | Smart Change: Personal Finance

For example, you can check your earnings history with the Social Security Administration – once you set up your “My Social Security” account. This data is used to calculate your benefits, so make sure it’s correct. Here are three other effective ways to enhance these benefits.

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

It is also clear that the more earnings you make during your working life, the more benefits you will get to some extent. Let’s say you’ve already worked for 35 years, and you’re thinking of calling it quit now, as you approach 62, the earliest age at which you can claim your benefits. Well, if your first few years feature a lot of part-time work, or your earnings are low at the time, those low numbers will hurt your benefits check. It’s the same if you had a reasonable and fairly average income in the first set of working years, but now you’re earning a lot more than you ever did, even on an inflation-adjusted basis.

In these cases, you may be able to significantly increase future benefits by working for a few more years. For each additional year that you work, your income in the year with the lowest income will be excluded from the calculation. Remember – all that matters is 35 years of highest paid earnings.

You may be very proactive about it and work hard to increase your income for a few years – perhaps by taking on a side job, getting a higher paying job, or switching to a more lucrative career.

Finally, another powerful benefit-enhancing strategy: delaying when you start reaping the benefits. We each have a “full retirement age” at which we can start earning Full of The benefits we are entitled to. For most of us, the ratio is 66, 67, or somewhere in between. But we can start collecting Social Security retirement benefits as early as 62. The point is, they’ll be smaller than if we started collecting later, but we’ll collect more checks that way.

We may also be late in starting to collect our benefits. Every year we do this past full retirement age and up to age 70, our benefits will grow by about 8%. So waiting from ages 67 to 70 can make our paychecks 24% larger. Note, however, that if we delay, we will end up collecting fewer checks. The system is really designed so that it doesn’t matter when we start collecting if we live a life of medium length.

However, there are plenty of good reasons for the delay, if we can. For starters, if we’re healthy and have a decent chance of living a longer-than-average life, we’ll go out ahead. Also, if we’re married and have a higher income in the family, it might be smart to maximize our benefits because when one spouse dies, the other gets any of the benefits, whichever is greater – and that can really help the lower-income spouse.

A final consideration is inflation — and cost of living adjustments (COLAs) that Social Security recipients receive in most years. The higher your interest, the higher the annual increase.

It can pay to read Social Security and make some smart moves, both now and later. You may end up with a more financially secure future if you do this.

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