Social security makes up at least 90 percent of income for more than 33 percent of America’s seniors (according to the Wall Street Journal). Odds are, it will probably make up a significant portion of your retirement income. Fortunately, if you’re nearing retirement age, there are a few ways for you to increase your future Social Security income.
Many people do not realize that their Social Security check is based on their top 35 years of income or that these years are adjusted for inflation. Therefore, someone who has worked for 40 years, will have all 40 of those years adjusted for inflation, then the top 35 years will be averaged together and a percentage of that amount will become your monthly Social Security benefit. Note that in this calculation, there is no additional benefit for earnings that exceed the Social Security earnings maximum for that given year. In other words, trying to increase your earnings significantly in the last few years before retirement will probably not increase your Social Security benefit by too much.
Instead, start by making sure you have 35 years of earnings. People with less than 35 years have zeros computed into their average for every year without income. If you have some low years in your highest 35 years of earnings, consider working longer to replace old low earning years with high earning years. Depending on your age, working longer may allow you to retire later, which can also increase your benefit.
Under the current rules, people born in 1938 have a retirement age of 65 years and two months. For people born after 1959, the normal retirement age is 67. It is possible, however, to start receiving benefits as early as age 62. The price for this is that for the first 36 months of early retirement you permanently lose about .56 percent of your benefit per month. For additional months of early retirement, you lose about .42 percent per month.
In order to increase Social Security benefits, delay taking Social Security until age 70. For people turning 62 after 2004, there is an 8 percent yearly increase in benefits for each year retirement is delayed beyond your normal Social Security retirement date. That means by working for five more years, your Social Security check could increase 40 percent.
If your benefit is going to be based on your spouse’s earnings, there are still ways to increase your check. In general, the lower earning spouse gets a Social Security benefit equal to 50 percent of their spouse’s benefit. However, if you are close to having enough credit to earn your own benefit, you may want to see if working a little longer or even picking up a part time job could increase your benefit.