Social Security is an important part of the retirement income puzzle for many people. Even if retirement is still decades away, it’s important to understand what you can do to maximize those benefits once the time comes. Employing some simple strategies can help you enjoy a Social Security bonus when you’re ready to retire. If you’re curious about how to best manage a Social Security bonus from start to finish, you may want to consider working with a financial advisor. Check out SmartAsset’s free advisor matching tool to find advisors that serve your area.
What Is the Social Security Bonus?
There is no specific “bonus” retirees can collect from the Social Security Administration. For example, you’re not eligible to get a $5,000 bonus check on top of your regular benefits just because you worked in a specific career. Social Security doesn’t randomly award money to people. And there’s no way to legally trick Social Security into giving you more money.
Instead, Social Security benefits are paid out according to a specific formula used by the Social Security Administration, which is based on your lifetime earnings. There are, however, some legitimate ways to effectively create a Social Security bonus for yourself by maximizing the benefit amount you’re eligible to receive. If you’re interested in calculating your Social Security amount, here are some tips to consider.
How to Get a Social Security Bonus
Option 1: Increase Your Earnings
Social Security benefits are based on your earnings. Specifically, they’re computed using your average indexed monthly earnings which represent up to 35 years of your indexed earnings. The Social Security Administration uses this amount to calculate your primary insurance amount (PIA), which determines how much you receive in retirement benefits.
A simple way to increase your benefits is to increase your lifetime earnings. Making more money means the Social Security Administration has a higher starting point for indexing your earnings. This can result in a Social Security bonus if you’re able to qualify for a higher monthly benefit amount when you retire.
Increasing your annual income can be particularly helpful if there are gaps in your work history. The Social Security Administration looks at 35 years of earnings but a “0” is entered for years in which you don’t report any earnings. So if you have a few years where you didn’t have any income because you were in school, for example, raising your earnings for other years could help to bring up your average.
Option 2: Wait Until Age 70 to Claim Social Security Benefits
Technically, you can begin drawing Social Security retirement benefits at age 62. The catch, however, is that this will reduce your benefit amount. You can avoid this scenario by waiting until your full retirement age to begin taking benefits. This is 66 or 67 for most people, depending on when you were born.
But there’s a third option: Delay benefits until age 70. In doing so, you can get a Social Security bonus in the form of a higher benefit amount. The bonus is worth roughly 8% more for each year you delay benefits past full retirement age.
Waiting until age 70 to claim Social Security benefits can result in a larger check but you have to consider how realistic that option is. If you plan to keep working until age 70 or beyond, then you may not need to tap into your 401(k), IRA or other assets to cover your expenses. But if you plan to retire at 65, you’ll have a five-year gap in which you’ll need to draw on your assets for income.
Option 3: Be Strategic With Spousal Benefits
Married couples can both collect Social Security retirement benefits, but it’s important to consider the timing for doing so. Again, both spouses could take benefits as early as 62, but it might pay off for the lower-earning spouse to wait to collect their benefit check.
If the second spouse waits until age 70 to claim benefits, that can result in a larger Social Security check. Whether this makes sense can depend on whether one or both of you are still working, your anticipated benefit amount and how much income you have apart from Social Security.
You’d also have to factor in life expectancies. For example, if you’re close to the same age and you have similar earnings records it might make sense for both of you to wait until age 70 to claim benefits if you expect to live longer. But if you’re in poor health and anticipate living fewer years in retirement then you might be better off taking benefits earlier. Talking to your financial advisor can help you figure out which strategy might make the most sense.
Option 4: Make the Most of COLA Increases
Social Security recipients can get an increase in benefits without doing anything at all. Cost of living adjustments (COLA) issued by the government are designed to increase monthly Social Security benefit amounts in order to help retirees keep pace with inflation. For example, benefits rose by 8.7% for approximately 70 million Americans in 2023 thanks to a cost of living adjustment.
This Social Security bonus isn’t really a bonus; it’s the Social Security Administration’s way of helping seniors counter rising consumer prices. And COLA increases don’t always match the overall rate of inflation. But getting an increase can give you more income to base your retirement budget on. That can be helpful if you find yourself paying more for healthcare or medications as you get older.
The Bottom Line
The idea that there’s a hidden Social Security bonus isn’t entirely accurate. There’s no magic wand you can wave that will instantly put more benefits in your bank account. But understanding how Social Security benefits are calculated and your options for claiming those benefits can help you to get the most money possible as you prepare for retirement.
Retirement Planning Tips
- Consider talking to a financial advisor about how to make the most of Social Security in your retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Social Security isn’t the only way to secure your retirement. You can also build wealth by saving consistently in your 401(k) plan and/or an Individual Retirement Account (IRA). If you’re already contributing to these accounts, you might consider opening a taxable brokerage account online as well. This way, you can save even more toward retirement without being restricted by annual contribution limits.
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