Social Security benefits play an important role in your retirement plan. You can receive Social Security income as early as age 62, but you can also delay it until you turn 70. How much you receive is much more difficult to calculate. Factors include how long you’ve worked, how much you’ve earned, and when you receive benefits.
The benefit calculation is very complicated. Social Security administrators average out 35 of your highest-earning years. They will then adjust the other years according to this calculated average. From there, your total wages earned are calculated, which results in your Average Indexed Monthly Earnings (or AIME). This AIME is then used to calculate your monthly benefits.
There are a couple of things you can do to maximize your Social Security benefits. The easiest one is to simply postpone your retirement age, or at least the age where you’ll withdraw from Social Security. Instead of starting as early as age 62, you can receive benefits at age 67. For more benefits, you can wait until you’re 70. The other part of Social Security benefits is to increase your wages and put in more years of work. Maybe it’s time to ask for a raise.
Maxing out Social Security means you receive the highest amount possible in terms of benefits. If your wages have exceeded the wage base limit every year for 35 years, you’d be eligible to receive the highest amount, which is $3,895 for 2022. Most people don’t get even close to maxing out the Social Security benefits even if they earn more than the base limit for a few years at the height of their careers.
To receive the maximum benefits, you must have earned more than the base limit every year for 35 years. In 2021, the limit was $142,800. A few years earlier, in 2018, it was $128,400—still a tall order for most people. You can still receive Social Security benefits even if you earn much less, but you won’t receive the maximum amount.
You’ll receive more money if you wait to apply for Social Security benefits until you're 67. However, you may have good reasons to get them sooner. It’s really a personal decision and depends entirely on your circumstances. If you want to receive more benefits, you can even wait until age 70 to request them.
If you would like to maximize your Social Security benefits, please give Oceanic Capital Management a call. We have earned our NSSA certificate and use special software that allows us to custom design and compare individual claiming strategies. Together, we’ll help you determine what you’re eligible for and the best strategy for your situation. We’ll also discuss other retirement plan options which can dovetail with your personal claiming strategy to maximize the life of your portfolio. Well before you stop working, give us a call and we can plan a smarter retirement journey.
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