For most Americans, $20,118 a year will not be enough to enjoy a comfortable retirement. But the average monthly Social Security benefit for retirees in October 2022 was $1,676.53. On an annualized basis, that’s just over $20,118.
However, there are steps you can take to increase the amount Social Security will pay you during your retirement years. Here are three easy ways to beat the average Social Security benefit.
1. Work at least 35 years
Social Security calculates your benefits based on your best 35 years of earnings. What happens if you don’t work that long? Your benefits will be lower than they would otherwise be. The federal program formula will actually add zeros for all the years you didn’t work to arrive at the total of 35 years.
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Keep in mind that working in some jobs does not count towards those 35 years. For example, some state, county, and city employees have public pensions. If you are employed for a period in one of these jobs, your earnings will not be included in the calculation of Social Security benefits.
2. Maximize your earnings
You will also want to maximize your income as much as possible during those 35 years. Admittedly, this is easier said than done. However, there are ways to make more money and ultimately increase your Social Security benefits.
Some jobs pay more than others. Choosing a more lucrative field is one of the most important things you can do to receive a bigger Social Security check down the road. But even if you’re not in one of the highest paying jobs, you still have options.
Do whatever you can to impress your boss enough to earn a raise. If that doesn’t work, consider finding another job that pays more or taking on a second part-time job.
3. Wait to collect benefits
I’ve saved what is arguably the easiest way to beat the average Social Security benefit for last. It’s simple: Wait to collect your Social Security retirement benefits.
Many Americans retire at age 62, the earliest age at which they can claim Social Security retirement benefits. However, there is a significant penalty for taking this route. Your monthly benefits could be reduced by up to 30%.
Social Security reduces your benefit by 0.55% for each month of early retirement before you reach full retirement age (FRA), up to 36 months. If you retire more than 36 months before your FRA, your benefit will be reduced by almost 0.42% for each month of early retirement beyond 36 months.
Your best bet for beating the average Social Security benefit is to wait until age 70 to collect. A recent article published by the National Bureau of Economic Research (NBER) found that more than 90% of Americans would be better off waiting to receive Social Security benefits until they turn 70. The researchers who wrote the paper also calculated that the median lifetime loss from not waiting until then exceeded $182,000.
No more headache
Social Security was not designed to fully cover Americans’ expenses in retirement. Receiving higher-than-average monthly benefits of $1,677 or more probably won’t be enough. However, there are other simple things you can do to make sure you can retire comfortably.
A smart approach to ensuring you can retire without lowering your standard of living is to build up another retirement savings. For example, put as much money as you can into a 401(k) or IRA plan. If you start early enough, the combination of Social Security and those Supplemental Retirement Accounts might just settle you into your golden years.
The $18,984 Social Security premium that most retirees completely overlook
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