3 Social Security Strategies to Fund Your Retirement | Smart Change: Personal Finances

(Selena Maranjian)

Social Security will likely be more vital to your future financial security than you think. But it might provide less than you would like or expect; the average monthly retirement benefit was $1,669 recently (about $20,000 per year). But whatever it brings will be significant: According to the Social Security Administration, the program provides about 30 percent of a senior’s income.

It is therefore important to make smart decisions that will help you get the most benefits possible. Here are three strategies to help you do that.

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1. Earn more

It may seem obvious: Earn more to get more Social Security income. But there are a few more nuances. For one thing, the formula that determines our personal Social Security benefit is based on our earnings for the 35 years in which we earned the most (on an inflation-adjusted basis). If you’ve earned a lot during your working years — maybe a lot more than average – but have only worked 28 years, there will be seven years of zeros factored into the calculations, reducing your benefit. So consider working for at least 35 years, if you can.

There’s a good reason you might even want to work a few more years, if you’re earning a lot more today than you did in the past, on an inflation-adjusted basis. This is because for every year beyond 35 years of work, a year with higher earnings will push out the year with lower earnings. You can increase your average earnings by working longer.

Thinking outside the box can also help. Don’t just wait for annual pay raises or ask for a raise every few years. You may be able to boost your income with a side gig or by getting creative in other ways, such as renting space in your home through a home-sharing service.

2. Delay the start of your benefits

The next step is timing. We each have a Full Retirement Age (FRA) at which we can begin to receive the full benefits to which we are entitled based on our earnings history. For most of us, it’s 66, 67, or somewhere in between. We can start collecting as early as 62 (as many people do) and up to 70.

For each year before your FRA that you start collecting, your benefits will decrease – even though you will collect more checks in total. For each subsequent year until age 70, your benefits will increase by approximately 8%, although you will receive fewer checks in total.

If you can defer from age 67 to 70, you can increase your benefits by about 24%! That’s enough to turn a $2,000 monthly check into $2,480.

The table below shows the percentage of total Social Security benefits you will receive depending on when you start receiving them:

Start collecting at:

FRA of 66

FRA of 67




























Source: Social Security Administration.

3. Don’t rely too much on Social Security

Finally, it’s a smart strategy not to rely too much on Social Security and to set up additional income streams for your later years. Remember that the average monthly benefit is $1,669. If you have earned much more than average in your working life, you could receive $30,000 or even $45,000, but probably not much more. Chances are you want or need a little more than that to live on each year.

Estimate how much you’ll need to retire and find ways to get the necessary income. By saving aggressively and investing effectively, you can raise a lot of money. You could park a large chunk of dividend-paying stocks and use some to buy a fixed annuity for almost guaranteed income. Whatever you do, make sure you have a good plan.

With a few smart steps, you can maximize your Social Security benefits and enjoy a more comfortable retirement.

The $18,984 Social Security premium that most retirees completely overlook

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