How To Maximize Your Social Security Benefits

There are multiple strategies to help you maximize your Social Security benefit. Three popular methods include waiting until you’re 70 to collect benefits, working for 35 years and earning a higher salary before retirement.

In 2023, many older Americans are still feeling the effects of high inflation. While the 8.7% cost-of-living adjustment (COLA) helps bridge the gap, it doesn’t always provide enough financial support for older adults to live comfortably. According to the Center on Budget and Policy Priorities, Social Security benefits only replace about 37% of past earnings.

You can also boost your benefit by receiving dependent, spousal or survivors benefits, being cautious about exceeding the earnings limit and minimizing your social security tax liabilities.

Learn how each tactic can help you maximize your Social Security benefit to avoid missing out on a higher payout.

If you collect your benefit early at age 62, your benefit will be reduced. If you wait until you’ve reached your full retirement age (FRA), you will get 100% of your benefit. But if you delay collecting your benefit until you surpass your FRA, your benefit amount increases each year.

Below is an example from a personalized Social Security statement showing how your FRA can affect your Social Security benefit amount. Remember that the statement is a personalized example — the information below won’t reflect your exact benefit amount.

In the example above, the difference between collecting your benefit at 62 and 70 is $1,169. If you choose to start collecting benefits at 62 instead of 70, you could miss out on up to $140,280 of benefits within a 10-year span.

Your benefit amount is based on your highest 35 years of earnings. If you haven’t worked for at least 35 years, your benefit amount will be reduced. Any years with no earnings will result in zeros.

Years with zero income will bring down your benefit amount.

Let’s say you’ve worked for 34 years in total. To raise your benefit amount, continue to work for one more year. That way, this year’s income will replace the zero in your work history, which will raise your benefit amount.

If you’ve already worked for 35 years, your next step to maximize your benefit is earning a higher salary. Your benefits are calculated off your highest 35 years of earnings, so you can replace a lower earning year with a higher earning year if you continue working.

Say you had a $40,000 salary for 10 years and then an $85,000 salary for 25 years. You’ve already worked for 35 years but want to replace some of your lower earning years to boost your benefit.

You could take on a job with a $60,000 salary and work it for three years before you retire. As a result, your benefit will be calculated with your earnings history of $40,000 for seven years, $60,000 for three years and $85,0000 for 25 years.

If you have a young child, your spouse makes a higher income than you or if your spouse has passed away — you could qualify for a higher benefit. How each benefit type affects your payout varies, depending on what type of benefit you’re receiving.

If you continue to work while receiving Social Security, your benefit amount could be reduced if you make above a certain earnings limit. What age you are determines if you have an annual earnings limit or not.

If you’re below your FRA and are collecting benefits, your annual earning limit is $21,240 in 2023. If you’re collecting benefits during the year that you reach your FRA, your earnings limit is $56,520. Any income earned above your limit will be reduced.

If you’re already your FRA or older, you have no earnings limit. You can earn as much as you’d like and face no reduction to your benefits.

To maximize your benefits, wait until you reach your FRA to earn above the earnings limit.

Based on your earnings and tax filing status, up to 85% of your Social Security benefits could be taxable. To maximize your benefits, you could try to stay below the tax limits.

If you’re filing as single and your combined income is under $25,000 — your benefits won’t be taxed. If you’re filing a joint return and you and your spouse have a combined income under $32,000 — your benefits won’t be taxed.

If you make above the limits listed above, 50% or 85% of your Social Security benefits could be be taxable.

Your maximum benefit is the most money you can get from Social Security. If you choose to retire at your full retirement age (FRA), your maximum benefit amount is $3,627 in 2023.

However, not everyone has the same maximum Social Security benefit limit. The limit varies from person to person and is higher the longer you wait to start collecting Social Security benefits. If you wait to start collecting benefits until you turn 70, your highest maximum benefit available would be $4,555.

If you retire early and begin taking payments at 62, the most your monthly benefit can be is $2,572. If you want to maximize your Social Security benefit, collecting benefits early would be the wrong move, since it will lower your maximum benefit limit.

While many elect to receive Social Security as soon as they are eligible, you end up leaving a lot of money on the table by retiring early. One of the easiest ways to maximize your monthly benefit amount is to hold off on taking Social Security for as long as financially possible.

To illustrate, the difference between taking the benefit when retiring early at age 62 and the maximum benefit when retiring late at age 70 equals more than $200,000 left on the table over the span of 10 years.

There are several factors that determine your maximum benefit. It should also be noted that, at minimum, you must earn 40 Social Security credits to qualify for any kind of benefit. In most cases, 40 credits equate to 10 years of work.

The two main areas that will impact your maximum benefit are your retirement age and your earnings history.

Since your maximum benefit amount increases the longer you wait to retire, your age plays a major role in determining your maximum benefit. Your full retirement age varies depending on the year you were born.

The closer you can get to your full retirement age before taking Social Security, the bigger your maximum benefit will be. Benefits will further increase if you wait past your full retirement age. But, unlike retirement age, there are other factors that are more difficult to control and can’t be decided at the last minute.

The income you earned while you were in the workforce plays a large role in determining your maximum Social Security benefit. Simply put, the higher your earnings, the higher your maximum benefit will be.

You achieve your maximum Social Security benefit by earning what is known as the maximum taxable income while in the workforce for up to 35 years. Your benefit is determined by analyzing your average indexed monthly earnings throughout your career, meaning your income is adjusted for inflation in the calculation. If you’ve worked more than 35 years, then the 35 years in which you made the most income will be used.

If you want to maximize your benefit, you can continue working as you collect benefits. If you’ve made a high income compared to previous years, your benefit amount will be adjusted to reflect your earnings.

In 2023, wages up to $160,200 are taxed by Social Security. You would have to earn at least this amount to be eligible for the maximum possible benefit at retirement.

While Social Security serves as the base income for many older adults, it isn’t the only way that you can bring in money after you’ve retired and is not the only income avenue that you should consider when planning for retirement.