A lot of people make financial resolutions around this time of year. This could include paying down debt or saving for a big financial goal like retirement. But here's another option to consider: Boosting your future Social Security checks.
You might not think you can do much about that if you're too young to claim, but your working years are actually the best time to try to increase your benefits. Here are three moves you can make in 2023 that could lead to larger Social Security checks for life.
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1. Work if you're able to
It sounds deceptively simple, but working and paying Social Security payroll taxes is key to boosting your retirement benefit. The government bases your Social Security checks on your average monthly earnings over your 35 highest-earning years, adjusted for inflation.
Retiring before you've worked 35 years can reduce your benefit, because then the government includes zero-income years in your calculation. Even one of these can shrink your monthly checks by several dollars.
There's no downside to working longer than 35 years, though. Many people find that they earn more in the latter stages of their career than they did when they were just starting out. Once they pass the 35-year mark, their more recent, higher-earning years begin to replace some of their lowest-earning years in their benefit calculation. And that leads to larger checks when they eventually sign up for Social Security.
2. Do what you can to raise your income now
Raising your income today will most likely require you to pay more Social Security taxes in 2023. That, in turn, will give you larger benefit checks in retirement.
There are different ways you could go about this. January and February are popular hiring months, so you may be able to find a better-paying job with another company. Or you could negotiate a raise with your current employer. You could also start a side business of your own.
The only people this tip won't work for are those who already make a lot of money. In 2022, you only pay Social Security payroll taxes on the first $147,000 you earn. This will rise to $160,200 in 2023. Those who already make more than this won't be able to boost their Social Security checks by raising their income further.
3. Choose your starting age strategically
You can begin claiming Social Security at any point after you turn 62, but if you want the full benefit you've earned based on your work history, you must wait until your full retirement age (FRA) to sign up. This is somewhere between 66 and 67, depending on your birth year.
Signing up under this age is considered claiming early. You'll get more checks by doing so, but each one is smaller. Those who sign up as soon as they turn 62 only get 70% of their full benefit per check if their FRA is 67, or 75% if their FRA is 66.
Delaying benefits grows your checks a little at a time until you reach your maximum benefit at 70. That's 124% of your full benefit per check if your FRA is 67, or 132% if your FRA is 66. But delaying Social Security also means you have to cover your living expenses on your own until you sign up, so it's not always feasible.
Ideally, you'd choose your starting age based on when you thought you'd qualify for the largest lifetime benefit. Generally, those who expect to live into their 80s or beyond receive more by delaying benefits, while those with shorter life expectancies have more to gain by signing up earlier
You can calculate your estimated lifetime benefit by taking your monthly check amount, multiplying it by 12, and then multiplying that by the number of years you expect to claim. For example, an $1,800 benefit claimed for 15 years would give you a lifetime benefit of $324,000.
If you're not sure how much you'll qualify for at a certain age, create a my Social Security account. It has a calculator that can show you approximately how much you'll earn at any given claiming age between 62 and 70, based on your work history to date. Compare a few ages and follow the steps above to determine which age you believe will get you the most money overall.
Your plans for Social Security might change over time, but you can always adjust your claiming age later. Don't put off the above steps until you're closer to retirement. The sooner you get started, the better your odds of securing a comfortable benefit.
