The typical senior will need roughly 70% to 80% of his or her former earnings to live comfortably during retirement, and in many cases, Social Security will only provide about half that amount. That’s right — Social Security isn’t designed to sustain retirees in the absence of outside income. But if you’re nearing your golden years without any money in savings, you’ll need to maximize your Social Security benefits to avoid financial troubles later in life. Here are a few things you can do to boost those monthly payments.
1. Snag a late-career raise
Once you reach a certain point in your career, you may not be so motivated to fight for a raise. After all, why put yourself out there in your 60s, when you only have a year or two in the workforce left? But while boosting your income may not do much to change your near-term financial picture, it could help from a Social Security standpoint.
Your Social Security benefits are calculated based on your 35 highest-paid years on the job. If you manage to get a raise later in life, you’ll introduce a higher number into your personal benefits calculation, which could help notch those payments upward. And remember, when you’re entering retirement with no savings at all, even a minor bump in benefits helps.
2. Work a few years longer
As just mentioned, your Social Security benefits will be based on your 35 highest-paid working years. But if you took time off during your career, whether to raise children, care for a loved one, or another purpose, you may not have a full 35 years of work on record. If that’s the case, you’ll have a $0 factored into your personal benefits calculation for each year you didn’t earn money.
Extending your career could therefore boost your benefits by replacing a couple of $0 years with an actual salary. Even if you did work a full 35 years, if you’re earning much more at present than you were earlier on in your career, replacing, say, a year with $20,000 in earnings with a $100,000 salary could do wonders for your benefits equation.
3. Delay benefits past full retirement age
Once you reach full retirement age, you’re entitled to collect the full monthly Social Security benefit your earnings history entitles you to. That age is either 66, 67, or 66 and a specific number of months, depending on your year of birth.
However, you don’t have to claim benefits at full retirement age, and if you hold off on signing up for Social Security past that point, you’ll receive an 8% boost in benefits for each year you delay your filing. That option will remain in play until you turn 70, which means that if you’re looking at a full monthly benefit of $1,600 at a full retirement age of 67, waiting until 70 to file will increase each payment you collect to $1,984. And that hike will remain in effect for the rest of your life.
Let’s be clear: Entering retirement without personal savings and relying solely on Social Security isn’t ideal. Again, those benefits will only replace a limited portion of your former earnings, and if you don’t take steps to generate retirement income in other ways, you could wind up struggling. But if you know you’ll be relying on those benefits heavily, it pays to boost them as much as you can.