Date Last Updated: September 13, 2024

Social Security provides a guaranteed fixed income to many retirees, helping pad their retirement savings and income. But did you know there are strategies you can use to max out your monthly benefit? According to the Social Security Administration, the average monthly Social Security benefit payment is $1,782.74. The maximum monthly payment as of September 2024 stands at $4,873, which is 2.7 times more than the average monthly payment.

Given the rising cost of housing, goods, healthcare, services, and many other essentials, the more money you have during your retirement years, the easier you can rest, knowing that you likely won’t run out of money in retirement and can live life how you want in your golden years. This article covers five ways you can maximize your Social Security benefits.

What Is Social Security? 

Social Security was established to assure the economic certainty of the American people. It was created during the height of the Great Depression. President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935. Before the Social Security Act, Americans were essentially on their own to plan and save for retirement and didn’t have much of an economic safety net. 

Many retired workers above age 62 rely on Social Security for some of their monthly income. Social Security benefits are paid to you monthly for the remainder of your life. In the event of your death, your spouse or dependent children can become your beneficiaries, but there are stipulations on who can collect your benefits after your death. To learn more about the Social Security survivors benefits, click here.

To qualify for Social Security benefits, you must have worked for at least 10 years and earned a minimum of 40 Social Security credits. During your working years, you can earn up to four credits per year. The amount needed for each credit can change, but in 2024, you need at least $1,730 in covered earnings to earn one credit. 

Now that you know what the Social Security program is, we’ll dive into the five ways you can maximize your payments.

Five Ways to Maximize Social Security Benefits    

1. Work Longer

Although you’re required to work a minimum of 10 years to qualify for any Social Security benefits, the longer you work, the greater your benefits will be (up to the current max of $4,873 per month in 2024).

According to ssa.gov: “Although you need at least 10 years of work, or 40 credits, to qualify for Social Security retirement benefits, [the Social Security Administration] base the amount of your benefit on your highest 35 years of earnings. If you do not have 35 years of earnings by the time you apply for benefits, your benefit amount will be lower than it would be if you worked 35 years.” This is because if you have not worked 35 years, zeros will be factored into your average payout, thus lowering it.

Most people’s salaries increase as they progress through their careers. If you work for more than 35 years, the Social Security Administration will use the last 35 years in which you earned income to calculate your benefits, causing some of your earlier, lower-earning years to drop out of the calculation. Working longer has benefits beyond impacting your Social Security: You’ll likely be able to garner more savings and delay withdrawals from your retirement accounts.

2. Earn More

Earning more money during your working years can boost your benefits. However, there’s a cap on how much of your yearly earnings are used to determine your benefits. According to ssa.gov, as of 2024, the maximum amount that Social Security can tax is $168,600—known as the “maximum taxable earnings.” The more you’ve paid in taxes, the greater your benefit in retirement, up to the maximum payout discussed above.

Paying taxes on the maximum would give you the highest possible Social Security payout, all else equal. So if you pay taxes on the maximum, which tends to rise each year, then you’re topping out your contributions to the system.”

3. Delay Retirement

You can start receiving benefits when you turn 62 but waiting longer to claim benefits can increase the amount you’ll receive from Social Security. According to SmartAsset, claiming benefits at age 62 can result in a 30% reduction of the amount you would have received if you had waited until the full retirement age of 67 (for those born in 1960 or later) to start collecting benefits. Do note those born before 1960 can fully retire at the age of 66.

Let’s put this in perspective. A 30% reduction in your benefits for retiring at age 62 is substantial, compounding over time and as your payment increases. Let’s use the average Social Security payment of $1,536.94 claimed at your full retirement age as an example. If you started claiming benefits at age 62, your reduced payment would be approximately $1,075 per month. An extra $462 a month is nothing to sneeze at! With the current U.S. life expectancy of 77 years according to the CDC, that equates to a loss of $83,149.20 in Social Security over your lifetime.

Waiting until age 70 to collect benefits can maximize your benefits even further. After your full retirement age, your pay will increase by 8% for every year that you wait to collect benefits. Using the average SS payment again, your benefit could increase to $1,905.81 if you delay retirement until age 70. To all the overachievers, please note that there’s no incentive in waiting past age 70 to start collecting benefits!

4. Suspend Your Benefits

If you start claiming benefits before the full retirement age but decide you don’t need the money currently or want to further maximize your benefits, you can suspend your benefits when you reach the full retirement age but not after age 70. For example, if you start collecting benefits at age 62, you can suspend your benefits at age 66 or 67 (if you were born after 1960) and resume collecting benefits at age 70. By suspending your benefits, you’ll earn delayed retirement credits of 8% per year.

Please note that when you suspend your benefits, you don’t have to pay back any money that you’ve already received. 

5. Seek Out a Financial Professional

There are many ways to claim your Social Security benefits, and the Social Security Administration cannot provide advice on your specific situation. This is where a financial or investment advisor specializing in Social Security can become invaluable. They can help you determine which path is right for you to maximize your payments. According to the Northwestern Mutual 2022 Planning & Progress Study, “More than six in 10 Americans (62%) say their financial planning needs improvement, yet only a third (35%) seek the help of a financial advisor.”

Takeaway

Given that so many people count on Social Security benefits as a significant portion of their retirement income to pay for expenses, it’s important to know how you can maximize your benefits. Working more years, earning more income, and delaying benefits until your full retirement age or age 70 will help ensure you receive the maximum benefits from Social Security. Visit the Social Security Administration’s website for more information

Understandably, you may not be able to do all the recommendations listed here but planning for and incorporating a strategy to help you increase your Social Security payments is the first step that many pre-retirees miss.

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This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals.

Past performance is no guarantee of future results, and any expected returns or hypothetical projections may not reflect actual future performance or outcomes. All investments involve risk and may lose money. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must evaluate and investigate any investments considered or any investment strategies or recommendations described herein (including the risks and merits thereof), seek professional advice for their particular circumstances, and inform themselves about the tax or other consequences of any investments or services considered. 

Investment advisory services are offered through Liberty Wealth Management, LLC (“LWM”), DBA Liberty Group, an SEC-registered investment adviser.  For additional information on LWM or its investment professionals, please visit www.adviserinfo.sec.gov  or contact us directly at 411 30^th Street, 2^nd Floor, Oakland, CA  94609, T: 510-658-1880, F: 510-658-1886,  www.libertygroupllc.com. Registration with the U.S. Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training.

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References

Baker, Brian and Royal, James. (Aug. 4, 2022). What is the average Social Security check? Bankrate. https://www.bankrate.com/retirement/average-monthly-social-security-check/

Centers for Disease Control and Prevention. (September 6, 2022). Life Expectancy. https://www.cdc.gov/nchs/fastats/life-expectancy.htm

Lake, Rebecca (March 02, 2022). 2022 Minimum Social Security Benefit. SmartAsset. https://smartasset.com/retirement/minimum-social-security-benefit

National Institute on Security Retirement (July 13, 2020.) New Report: 40% of Older Americans Rely Solely on Social Security for Retirement Income. https://www.nirsonline.org/2020/01/new-report-40-of-older-americans-rely-solely-on-social-security-for-retirement-income/

Northwestern Mutual (July 27, 2022). The Majority of Americans Say Their Financial Planning Needs Improvement, But Only a Third Seek Professional Help. https://news.northwesternmutual.com/2022-07-27-The-Majority-of-Americans-Say-Their-Financial-Planning-Needs-Improvement,-But-Only-a-Third-Seek-Professional-Help

Royal, James. (March 18, 2022). 6 ways to maximize your Social Security benefits. Bankrate https://www.bankrate.com/retirement/maximize-your-social-security-benefits/

Social Security Administration. (n.d.). Additional Work Can Increase Your Future Benefits. https://www.ssa.gov/myaccount/assets/materials/additional-work.pdf

Social Security Administration. (n.d.). Learn About Retirement Benefits. https://www.ssa.gov/benefits/retirement/learn.html#h1