3 Social Security Strategies to Bankroll Your Retirement – The Motley Fool

Social Security is a guaranteed source of income. Once you claim benefits, you’ll have them for life and won’t need to worry about the income they provide coming to an end. Because cost of living adjustments provide periodic increases to help benefits keep pace with inflation, you also won’t have to worry about your buying power from these checks declining substantially over time. 

Obviously, there are huge benefits to getting a big Social Security check — so taking steps to earn the largest possible amount of retirement income is smart. If you’re not sure how to do that, consider employing these strategies to ensure your checks can help bankroll your retirement. 

Two adults looking at financial paperwork.

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1. Boost your average earnings as much as possible

Social Security has a benefits formula that’s designed to replace around 40% of pre-retirement income for most seniors.

The checks retirees will get are based on average wages during their 35 highest earning years. As a result, increased earnings lead to a larger payment. By working a part-time job or taking other steps to increase income, such as developing new job skills and negotiating your salary throughout your career, you can make a huge impact on how much money Social Security provides you. 

2. Delay your benefits claim

Social Security benefits can start at 62. But if you want the biggest check available to you, you’ll want to wait another eight years before filing for benefits.

For each month you wait to start benefits between 62 and your full retirement age (FRA), you’ll avoid getting hit with early filing penalties that reduce your potential payment. Your full retirement age, which is when you get your standard benefit, is between 66 and four months and 67, depending when you were born. If you make it to FRA, you’ll still want to wait longer if maximizing monthly income is your goal. That’s because you can increase your standard benefit by earning delayed retirement credits for each month you wait beyond your FRA before payments begin. 

Early filing penalties equal five-ninths of 1% per month for the first 36 months before FRA and five-twelfths of 1% for each prior month that payments come in. They shrink your standard benefit by 6.7% for each of the first three years you’re early with your benefits claim and an additional 5% for each full year before then. Delayed retirement credits raise your standard benefit by two-thirds of 1%, which means they add up to an 8% annual benefits increase for each full year you wait to start checks after FRA.

Retirees on track to receive the standard benefit could earn as much as $900 more per month in Social Security by waiting until age 70 for their first check instead of getting it at 62. 

3. Be realistic about your benefits

Although taking these steps can sometimes increase your benefit amount by hundreds, or even thousands, of dollars, you must be realistic about the role your Social Security checks play in bankrolling your retirement. Most people need to replace 80% or more of pre-retirement earnings and your benefits simply aren’t designed to do that. 

So while you can and should try to increase the amount of retirement money you get, you also need to focus on other retirement preparedness measures including building a nest egg that will produce a generous amount of supplementary funds. By taking a multipronged approach to retirement planning and focusing on both increasing your savings and your Social Security, you can ensure you have plenty of money to live on in your later years.