Retiring with a juicy Social Security check can make a considerable difference when it comes to defining your quality of life, because we all already know that retirement life is expensive and complicated. We’re not going to beat around the bush. Many things increase, starting with the healthcare attention that a person needs after retirement and as they enter old age.
There are some simple strategies you can apply now, while you’re still in time to take actions to improve your Social Security check. There are also some things that you should avoid, and we are going to tell you about them below.
Don’t Hurry: Delay Your Retirement, if Possible
You should know that the longer you work and contribute to Social Security, the higher your benefit will be. If you can delay your retirement by even a few years, this can significantly increase your income.
The calculation of your benefits is based on the average earnings during the top-rated base period, which are usually the 35 consecutive highest-earning years accounted for by the Social Security Administration (SSA). With a more robust base period, you can include more years of higher income and thus average up your retirement check.
If you decide to retire before the full retirement age (FRA), which is 67 for most people born after 1954, the reduction in your benefits due to retirement will be less if your base period includes higher-earning years. Related to the previous point, you should also consider that to have better Social Security benefits, you must have a higher salary.
Purchase Better Salaries Before Retirement
As you increase your seniority at work and gain experience, you should and deserve to earn a higher salary. Take on new responsibilities, look for promotions and promote yourself to a higher hierarchy in your company: all this, without a doubt, will translate into a better salary and, therefore, into better retirement benefits.
On the other hand, retiring does not mean that you have to stop working completely. If you like to work and your physique allows you to do so, you can continue to hold some part-time work to improve your income and supplement it with the Social Security check.
A part-time job allows you to generate additional income to cover expenses, pay off debts, or simply enjoy a more comfortable lifestyle. Additionally, it keeps you physically and mentally active, which improves your overall quality of life on a physical, psychological and neurological level.
A part-time job helps older adults to socialize and interact with other people, which can be especially beneficial to combat social isolation and loneliness during retirement.
Mistakes to Avoid for a Better Retirement
As we said before, retiring early can be extremely detrimental to your income. For every year you retire before full retirement age, your benefit will be reduced by 5% to 7%. For example, if you retire at age 62, you could receive up to 30% less in benefits compared to if you had retired at age 67.
If you notice, it’s almost a third of your monthly check, and that’s a lot of money. The reduction in benefits is permanent, which means that you will not be able to recover the money you lost by retiring earlier, even if you live to a very old age.
But, how are benefit reductions calculated?
The Social Security Administration (SSA) monitors your income annually and compares it to the APE limit (Estimated Year of Production). If your income exceeds that limit, the SSA will reduce your Social Security benefits by $1 for every $2 you earn above that limit.
This benefit reduction is temporary and only applies to the year your income exceeds the APE limit. In the following year, your benefits will return to their normal level.
Special Considerations: this rule does not apply to all people. In fact, people with disabilities have other possibilities to improve their income. If you have a severe disability that prevents you from working, you may be eligible for Social Security disability benefits, known as SSDI.
This comes into play even if you are under full retirement age. If your spouse has reached “full retirement age,” you may be eligible to receive benefits as a spouse, even if you are under “full retirement age.”