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2 ways to increase your social security income by $ 814 + monthly

Maximizing your Social Security benefits from the move is a smart move to preserve the longevity of your savings. After all, the more you collect from the Feds, the less you’ll have to pull out of your retirement portfolio. Plus, starting from a higher base makes those percentage-based cost of living adjustments more valuable to you over time.

Here are two income growth strategies to consider. Either way can increase the average employee’s monthly benefits by more than $ 800.

1. Delay your Social Security application

The first thing to know is that you are eligible for full Social Security benefits when you reach full retirement age (FRA), an age set for you based on your year of birth. Applying for Social Security before the FRA reduces your monthly benefits and filing later. The FRA will increase your monthly benefits.

Senior woman holding cash and smiling.

Photo source: Getty Images.

Here’s how early filing reductions work. The discount applies to all of your benefits based on the number of months you apply before your FRA. If you apply no later than 36 months prior to reaching the FRA, your benefits will be reduced by five to nine by 1% for each month you arrive early. For any month exceeding 36, the reduction is 5/12 of 1% monthly.

Let’s put some numbers in that formula. Let’s say you are 50 years old today and your FRA is 67. You intend to claim at age 62 – that is, 60 months prior to your FRA. Your benefit reduction for the first 36 months is 20%, calculated as five-ninths of 1% multiplied by 36. After that, you will add 10% to that discount for the remaining months, calculated as 5/12 of 1% multiplied by 24. That is the total benefit cut of 30%.

You can avoid a 30% cut simply by waiting until your FRA claims Social Security benefits. But if you’re willing to defer your claim before your FRA, you’re eligible for deferred retirement credits – which can also be very significant. For each month you defer your claim outside of the FRA, your benefits will be increased by 2/3 of 1%. Those credits stop accumulating at age 70. So if you’re 50 today with an FRA of 67, you can defer your claim up to 36 months. That gives you a 24% increase in benefits.

Now let’s convert those percentages to real numbers. The table below shows the estimated benefit in today’s dollars at different required ages for current beneficiaries 50 years old. Benefits are calculated using Social Security’s quick calculators.

Current salary

The estimated benefit is 62

Estimated benefit at the FRA

The estimated benefit is 70

The difference between the benefits at age 62 versus 70

$ 40,000

$ 1,043

$ 1,537

$ 1,940

$ 897

$ 45,000

$ 1,123

$ 1,657

$ 2,093

$ 970

$ 50,000

$ 1,202

$ 1,777

$ 2,247

$ 1,045

$ 55,000

$ 1,282

$ 1,897

$ 2,400

$ 1,118

$ 60,000

$ 1,361

$ 2,016

$ 2,553

$ 1,192

Data source: SSA.gov, author’s calculations.

The right column shows the flip side of deferring your Social Security claim between age 62 and 70. If you make $ 50,000 today, an 8-year postponement can increase your monthly income by over $ 1,000.

2. Increase your income

You may not like the idea of ​​retiring until your 70th birthday. It can understand. Of course, you have the option of deferring Social Security for a year or two in exchange for a smaller benefit increase. But you can also enhance your benefits by increasing your income today.

Your Social Security benefit at FRA is based on your average inflation-adjusted monthly income over your 35 years of highest-paying employment. If you are 50 today, you have more than a decade to increase that average by adding years of higher income to your work history. Each year the higher income earned in the future replaces one year of the lower income in that 35-year calculation.

The likelihood of increasing your gains through higher earnings doesn’t yield the same results as simply waiting – but why not find an intermediary by combining both strategies? For example, let’s say you choose a side job to increase your current income from $ 50,000 to $ 60,000 annually. That increases your benefits at an estimated 62 $ 159 monthly. If you also wait until the FRA claims your benefits, the cumulative monthly increase goes up to $ 814. In addition, you will have the option to keep the extra income after leaving your full-time role. This helps to increase financial flexibility.

Have a Social Security Strategy

Only you can decide when to apply with Social Security. Deferring a claim benefits you financially, but not everyone wants to work until age 70. In that case, find opportunities for a raise while you are still working. That will help increase your Social Security benefits and hopefully give you the flexibility you need to retire as soon as it feels right.

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