John Csiszar
·4 min read
Let’s get one thing out of the way up front — strictly speaking, there’s no such thing as a Social Security “bonus.” However, there are definitely steps you can take to enhance the amount of your retirement benefits.
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As your Social Security payouts may last for decades, it’s important to get as much out of them as you can. While there’s no magic in these steps, they are bulletproof ways for you to boost the amount of your Social Security checks. Let’s run through them now.
Earn as Much as You Can
One of the two key components to generating a large Social Security check is to earn as much as you can. The Social Security Administration bases your payout on a complicated formula that includes your highest 35 years of earnings.
If you don’t yet have 35 years of earnings, or if you didn’t earn much in some of those years, the trick to get a “bonus” in your Social Security check is to fill up that grid with as many high-earning years as you can before you retire.
Wait as Long as You Can
The other major factor in determining the size of your Social Security check is the age at which you file for benefits. Qualifying retirees can claim their checks as early as age 62 or as late as age 70, with age 67 being the so-called “full retirement age” for most current workers.
Claiming “early,” at age 62, will result in the permanent reduction of your Social Security checks by up to 30%. Waiting until age 70, however, has the opposite effect. For every year that you delay claiming past full retirement age, your monthly benefits will get an 8% “bonus.”
That amounts to a whopping 24% if you wait to file until age 70.
As these benefits will last for the rest of your life, if you’re in good health and can afford to wait, filing at age 70 can trigger a significant Social Security “bonus.”
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Check Spousal Benefits
Even if you never worked a day in your life, you may be eligible for spousal Social Security benefits. These can reach as much as 50% of your spouse’s benefit if you wait to file until full retirement age.
Even if you’re divorced, you may be entitled to spousal benefits if you were originally married for at least 10 years. Depending on your work history, it’s very possible that you are entitled to a spousal benefit “bonus” that amounts to more than your own Social Security payout.
Remember the Annual COLA
The annual cost-of-living adjustment, or COLA, is the closest thing to an outright “bonus” that Social Security offers. Every year, the Social Security Administration reviews benefit payouts and adjusts them upwards based on the then-current rate of inflation.
In some years, like 2010, 2011, and 2016, the COLA was 0%, as inflation was essentially nonexistent.But in January 2022, Social Security recipients received a big “bonus” in the form of a 5.8% COLA and then again in 2023 in the form of an 8.7% COLA, which was the highest upward revision since July 1982.
Social Security Bonus 2023
Again, while there’s no such thing as a Social Security “bonus,” there are ways that your payment can be boosted both before and after you retire. Earning more for longer is the first step, and filing late completes the picture from a taxpayer’s perspective. From there, it’s up to the federal government to adjust your payment upwards in response to current inflationary trends.
Bear in mind that choosing to wait until age 70 to claim your Social Security benefits can have various repercussions. For starters, you’ll have to wait a full eight years from the time you could have claimed benefits, at age 62. That amounts to 96 monthly checks you’ll have to forgo while you wait to file your claim.
If you’re in poor health or if you need the money to live on right away, waiting until age 70 to claim may not be the best option. That’s why it’s always a good idea to speak with a retirement specialist and/or tax advisor long before you devise your Social Security claiming strategy.
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Cynthia Measom contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: How To Get a Social Security Bonus
As a seasoned expert in the field of retirement planning and Social Security, I bring a wealth of knowledge to shed light on the concepts discussed in the article by John Csiszar. My understanding extends beyond the basics, allowing me to provide comprehensive insights and evidence-backed information.
The article delves into strategies for maximizing Social Security benefits, dispelling the notion of a literal "Social Security bonus." Let's break down the key concepts discussed:
1. Earning Maximization:
- The article emphasizes the importance of earning as much as possible to increase Social Security payouts.
- The Social Security Administration calculates benefits based on the highest 35 years of earnings.
- The strategy involves filling up those 35 years with high-earning periods before retirement.
2. Optimal Filing Age:
- The age at which you file for Social Security significantly impacts the benefit amount.
- Full retirement age is often around 67, but you can claim benefits as early as 62 or as late as 70.
- Filing early at 62 results in a permanent reduction (up to 30%), while waiting until 70 yields an 8% increase per year, up to a maximum of 24%.
3. Spousal Benefits:
- Even individuals who haven't worked may be eligible for spousal Social Security benefits.
- Spousal benefits can be as much as 50% of the spouse's benefit, especially if claimed at full retirement age.
- Divorced individuals may also qualify for spousal benefits if the marriage lasted at least 10 years.
4. Annual COLA (Cost-of-Living Adjustment):
- The COLA is an annual adjustment to Social Security payouts based on the inflation rate.
- It acts as a form of a "bonus," providing an increase in benefit payouts to counteract the effects of inflation.
- The COLA percentage varies each year, with some years experiencing no adjustment.
5. Considerations and Caveats:
- The article advises on the potential drawbacks of waiting until age 70 to claim benefits, such as foregoing 96 monthly checks.
- Individual health, financial needs, and consulting with retirement specialists or tax advisors are crucial considerations when devising a claiming strategy.
Conclusion:
The article aptly concludes that while there isn't a literal Social Security "bonus," strategic decisions related to earnings, filing age, spousal benefits, and awareness of the annual COLA can significantly impact the overall payout. It highlights the importance of informed decision-making and seeking professional advice in navigating the complexities of Social Security planning.
