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You contribute to social security throughout your working life so that when you retire, you can benefit from a guaranteed income. You do not have a say in the amount of your social security contributions, but you have some control over the amount you withdraw. Here are four smart strategies you can use to increase your monthly benefits and enjoy a more comfortable retirement.
1. Work at least 35 years
The Social Security Administration (SSA) calculates your benefits by looking at your average monthly income during your 35-year highest earnings, adjusted for inflation (using an indicator called AIME.) If you do not have worked for at least 35 years, zeros are: added to your calculation, which significantly reduces the average, resulting in a reduction in monthly benefits. And if you have worked less than 10 years, you will not be eligible for social security benefits at all.
Source of the image: Getty Images.
If you plan to retire before you've worked 35 years, consider delaying it enough so that you have 35 years of income to display for your social security benefits. It does not hurt to work even longer if you can, because delaying benefits leads to more significant checks later. In addition, it is likely that you will earn more money at the end of your career than when you start. When you are working for more than 35 years, the earliest and lowest earning years fall and are replaced by the highest earning years, which means more control over the benefits for you.
2. Increase your income
Your social security benefits are based on your income during your working life. Therefore, everything you do to increase your income will increase your future social security benefits.
There are different ways to approach this. You can work overtime or pursue a promotion to your current job, change your business or take a higher education program to open new doors. You can also start making noise or generating passive income through rental properties or royalties on creative works. Just be sure to declare to the government all the money you earn through side channels. Otherwise, your social security benefits will not be improved and you may be exposed to a tax audit.
3. Choose the right age to start social security
You can register for social security as soon as you reach the age of 62, but it's not a good idea unless you can not pay your bills without it or not anticipating a life. long.
You must wait until your retirement age (FRA) – age 66 or 67, depending on your year of birth – if you want the full amount of your benefits by check, and for each month during which you apply for benefits before this age, the SSA will decrease. your benefit checks. Claiming at age 62 means that you will only receive 70% of your scheduled benefits if your FRA is 67% or 75% if your FRA is 66. You can also defer benefits beyond your FRA and your checks. will increase until you reach the maximum. 70 years. This corresponds to 124% of your planned FRA benefit of 67 and 132% for those of 66.
It's up to you to decide when you want to start. If you have not done so yet, create a my Social Security account to estimate your monthly benefit at different ages based on your current work history. Multiply these amounts by 12 to get your estimated annual benefit, then by the number of years you expect to receive benefits to determine your estimated lifetime benefit.
For example, if you receive a check for 1,000 USD per month from FRA and you receive benefits for 20 years, your lifetime benefit would be 240,000 USD (1,000 USD x 12 x 20). It is usually best to delay benefits if you plan to live long, but you should never postpone them for more than 70 years because your checks will not increase further after this point.
4. Coordinate with your spouse
If one spouse earns much more than the other, consider asking the lesser spouse to start social security at age 62, while higher financial support delays benefits until age 70, when he will receive a larger check. Second, if the lower earner is entitled to a higher benefit based on a spouse's work history than on his or her own account, the SSA will automatically switch to a spousal benefit when the higher income earner applies for Social Security. .
You can use a similar strategy if both spouses earn a similar amount, although the total lifetime benefits would not be very different from the one if both spouses took social security at FRA. In this scenario, it may be preferable for both spouses to delay benefits as long as possible.
Sit down with your wife and use the data from your my Security Security accounts to estimate how much you can each expect to receive and talk about when each of you plans to start applying for Social Security. Compare different scenarios until you find one that offers the best lifetime benefits for both of you.
You are never too young to start thinking about Social Security, and the sooner you do it, the more you can control the amount of your benefits. Try the four simple tips above and see what difference they can make for you.
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