3 Signs You’re Missing Valuable Opportunities to Increase Your Social Security Benefits | Smart Change: Personal Finance
Most people know that putting money into a retirement account will improve their financial security in the future, but not many think about how to improve their Social Security benefits to get more money in retirement. Yes, the government ultimately determines the size of your checks, but the formulas you use to do this are general knowledge.
You can take advantage of this knowledge to make more money for retirement, but many miss out on valuable opportunities to do so. Here are three signs that you’re missing out on opportunities to boost your future Social Security benefits.
1. You haven’t worked yet 35 years
The Social Security Administration considers your earnings over 35 years of the highest earnings, adjusted for inflation, when calculating your benefit. This is known as your indexed average monthly earnings (AIME).
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You can still qualify for Social Security if you haven’t worked for 35 years, but you may not be happy with the size of your benefits. The government will add zero-income years to your accounts, and even one of these years can reduce your paychecks by several dollars.
Working for at least 35 years helps avoid this problem, and some people choose to work longer. Those who work more often see their benefits increase over time. Once they pass the 35-year mark, the Social Security Administration replaces some of their lower-income years, often from early years in their careers, with more recent, higher-earnings years in the benefits account. This leads to larger monthly checks.
2. Have not thought about the implications of the age of your claim
The federal government assigns everyone a full retirement age (FRA) – between 66 and 67 for today’s workers – based on their birth year. You must wait until this age to claim the full benefits you are entitled to based on your employment history. This is known as the basic insurance amount (PIA).
But you can claim benefits as early as 62, although doing so will reduce your benefits by 25% per check if your FRA is 66 or 30% if your FRA is 67. However, often People with life expectancy choose to register early, as do many who struggle to pay their household expenses without Social Security assistance.
Delaying benefits slowly increases your checks over time until you reach your maximum benefit at 70. This is 124% of your PIA per month if your FRA is 67, or 132% if your FRA is 66. Waiting for a claim could lead to Greater lifetime benefit, but this usually only works for those who live into their 80s or beyond.
You can enroll anytime between 62 or 70. It’s up to you to decide what starting age is most beneficial to you. But it is wise to consider several options before making this call.
You can estimate the size of your checks for different starting ages by creating my Social Security account. Multiply your monthly benefit by 12 to get your estimated annual benefit, then multiply it by the number of years you expect to claim to get your estimated lifetime benefit. For example, a monthly benefit of $2,000 claimed for 20 years will give you a lifetime benefit of $480,000. Do this for several lifetimes until you find the one who offers you the most benefit overall.
3. You did not talk about your decision with your family members
Unmarried adults with no dependents can choose the age to claim Social Security based on what is best for them alone. But spouses and seniors who take care of children who are minors or have disabilities should think about how their decision will affect other members of their family.
Spouses and children may be eligible to claim benefits on your employment history, but they cannot do so until you sign up for benefits. This may affect when you choose to register. Claiming early may result in smaller checks for you in person, but if you have a spouse and minor children who also bring benefits into the family, you may end up with more money overall.
Sit down with all affected family members to speak as each eligible family member claims benefits. If you have any questions about who qualifies in your household, contact the Social Security Administration for clarification.
Not all of these tips may apply to you, but if you see any opportunities you missed above, take the time to review the suggestions here and make any necessary changes to maximize your benefit. Review your claim strategy annually when you look at your retirement plan, too. If you experience a major life or financial change, you may want to rethink when applying for benefits.
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