Many seniors end up relying quite heavily on social security to cover their living expenses once they leave the workforce. And that extends to those who manage to retire with a good chunk of their savings.
For this reason, it’s a good idea to withdraw as much money as possible from Social Security. And just working an extra year could help boost your monthly benefits significantly.
The benefit of working an extra year
Many people land at a specific retirement age and decide to stick with it. And so if you decide to retire, say, at age 67, which may be your full retirement age (FRA) for social security purposes, the idea of then having to work until age 68 does not may not suit you very well. But if you want a higher monthly Social Security benefit for life, those extra 12 months could make a huge difference.
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The longer you wait to claim Social Security, the higher the benefit you will get – up to a point, which is 70 years. But delaying your filing for a year after the FRA, for example, will give your benefits an 8% increase. And working an extra year might allow you to delay enrollment so you can take advantage of that increase.
In the meantime, if you’re looking to claim benefits before the FRA, be aware that filing early will result in a lifetime discount. So, let’s say your FRA is 67, but you plan to retire at 66. If you push yourself to work an extra year and delay claiming Social Security, you will increase your benefits by 6.67% due to not facing this reduction.
But that’s not the only way an extra year on the job market could boost your benefits. The monthly benefit you receive from Social Security is calculated on the basis of your best 35 years of salary. But if you’re able to replace a year of lower wages with higher wages, you’ll get a higher benefit in the process.
So if you’re 67 and you’re ready to retire, only now you’re making more money than you’ve ever made before, if you work another 12 months, you’ll replace a year of lower earnings with higher earnings, increasing your edge.
It pays to push yourself
At some point, you can and should decide that you’ve spent time in the workforce and are officially done with a job. But if you’re struggling financially as you approach retirement, it’s worth considering the benefits of delaying retirement for a single year.
Along with getting a higher Social Security benefit, working an extra year should leave your savings intact for another 12 months. You might also be able to successfully add to your IRA or 401(k) plan, giving yourself an extra cushion that could come in very handy once you officially stop working.
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