Social security is likely to be essential to your financial security in retirement. How critical? Well, consider that it provides about 30% or more of the retirement income of older Americans, with 37% of men, and 42% of women receiving 50% or more of their income.
So the more you can get from the program, the better – and recently the maximum monthly benefit was $ 3,895 – or about $ 46,740 per year. This might sound pretty good, but read on – because chances are you aren’t collecting as much.
Social security benefits
Let’s start with a small point of view. Recently, the average monthly Social Security benefit was $ 1,559, or about $ 18,700 per year. Obviously, it will be difficult for anyone to live well with this – indeed, it is not this far from the poverty line, which was $ 12,880 for an individual in 2021.
That’s the average, however – and if you’ve earned more than average in your working life, your benefits will also be above average. But they will never exceed $ 3,895 per month (as of 2021). (By the way, take a moment to understand that since $ 1,559 is the average, several million dollars raise less, often a lot less.)
To get an idea of the amount of Social Security income you come to you, go to the website of the Social Security Administration (SSA) and create a “my social security” account. Once you’ve done that, you can access anytime to see the latest estimates of your future benefits, based on the latest income information available to SSA. (You may also spot a mistake or two – if so, correcting them can increase your future income.)
Maximum benefit eligibility
So who gets the most benefits and how are they entitled to them? Well, you should have earned the maximum allowable salary during your working life and you should have delayed the start of collecting your benefits until you are 70 years old.
Maximum earnings do not mean Bill Gates or Warren Buffett type income. For each year, there is an income ceiling beyond which we are not taxed on our income for social security. For 2021, this limit is $ 142,800. You must therefore have maximized your income for all your years of income that are included in the calculation.
Here’s why age 70 matters: Each of us has a ‘full retirement age’ at which we can begin to receive all the benefits to which we are entitled, depending on our income – and for the most part. ‘between us, it’s 66 or 67 years old. But you can start collecting contributions as early as 62 and up to 70, with your benefit checks decreasing if you start early and increasing if you delay. (Of course, starting early means you’ll get a lot more checks, so that’s not as bad as it sounds.)
For this maximum benefit, you will have to delay the start of collection until the age of 70, which is difficult for many retirees who need this income earlier. Here’s a look at the benefits a top salary would receive, according to the SSA:
The maximum benefit depends on the age at which you retire. For example, if you retire at full retirement age in 2021, your maximum benefit would be $ 3,148. However, if you retire at age 62 in 2021, your maximum benefit would be $ 2,324. If you retire at age 70 in 2021, your maximum benefit would be $ 3,895.
Increase your Social Security benefits
If you begin to realize that the $ 3,895 is probably beyond your reach, know that there are still ways to increase the Social Security benefits you will get. For example, make sure you are working for at least 35 years, as benefits are calculated based on the 35 years you earned the most (adjusted for inflation). So if you are planning to retire after only working 30 years, be aware that the formula will incorporate five zeros for five years. Working a few more years can increase your profits – above all if (on an inflation-adjusted basis) you earn more than ever.
Growing your income for a few years can also work, and you could achieve this by taking a side job, like walking dogs, teaching music or a language, making and selling things online, or doing writing, writing, writing. publishing, photography, or web design, among many other options.
So don’t worry if you won’t get the maximum payout (although some of you will!). Instead, do what you can to just maximize the payout you ultimately receive. Spending some time reading about Social Security can pay off if it helps you get the most out of the Vital Program.