How confident are you that you’ll have the money necessary to retire when the time comes? If you’re depending solely on Social Security to get the job done, you may be in for a rude awakening.
Focus your mind on this number for a moment, if you will:
That’s what the average monthly Social Security benefit amounted to last year, according to the latest numbers.
Now, we’re not saying you can’t live on $1,348 every month — some people are exceedingly frugal, right?
But if you want your golden years to consist of something more than dumpster diving and eating buffet leftovers, you’ll probably want to start trying to fatten up that monthly check right now.
1. Play the waiting game
In the past, it was very common to retire and take Social Security at 62. But every year you wait after 62, you have an imputed return of 8% per year on your lifetime benefit. So if you wait from 62 to 70, the amount that Social Security pays climbs dramatically. (Benefits no longer increase after 70.)
2. Be sure you know your full retirement age
Since 2005, the full retirement age (FRA) has been 66. But as of January 1, 2017, the FRA has been taking a long slow climb.
The Social Security Administration Amendments of 1983 signed by President Reagan call for the FRA to ‘increase by 2 months a year for persons reaching age 62 in 2017-22,’ further noting that it ‘will be fixed at age 67 for those reaching age 62 after 2022.’
See the chart here from the Social Security Administration (SSA) so you can figure out your FRA based on your year of birth.
3. Pay attention to Social Security along the way
You may be years away from collecting Social Security, but it behooves you to know what’s going on with the system.
This year, the SSA announced a .3% increase in monthly payments throughout 2017. It’s the smallest hike — in years when there is a hike at all — since the mid-1970s.
When all is said and done, the .3% increase in 2017 will be roughly an extra $5 in your check each month. But hey, every dollar counts, right?
Likewise, you may be interested to know that in 2016, the maximum that any worker taking benefits at full retirement age could receive was $2,639 a month. But in 2017, that cap has been raised so the max monthly benefit can be as high as $2,687 a month.
When you know this kind of stuff, you demystify the whole Social Security thing. That way you’re less likely to shut down completely when the time comes that you have to claim benefits.
4. Check for errors in that statement you get from the SSA
That statement with your expected benefits arrives in your mailbox every five years when you’re 25, 30, 35, 40, 45, 50, 55, and 60 and over. Go through the numbers and make sure they look correct. Refer to your prior statement to make sure there are no unexpected changes.
You may not believe it, but a homeless woman managed to prove that Social Security owed her $100,000 after more than a decade! She did it by keeping accurate records from the days when she was working.
5. Can’t find that paper statement? Sign up for a my Social Security account
This is the easiest way to keep tabs on your benefit. Sign up here for free.
6. Raise your income today
What you get from Social Security has everything to do with your 35 highest earning years. So you might consider negotiating a raise or taking on a second job, in order to boost your income.
If you’re looking for more ways to make extra money, check out Clark’s Work from Home Guide, which has legitimate ways you can earn some extra money. None of the sites listed on the guide will make you rich, but they will help you supplement your existing income.
7. Know how much you can earn and still get your full benefits
If you choose to retire before 66, you can always opt to work part-time to supplement your income. Thankfully, you’ll now be allowed to earn up to $16,920 in 2017 without it compromising your Social Security benefits. That’s up from $15,720 in 2016.
If you do go over the earnings limit, Social Security will withhold $1 in benefits for every $2 you earn over the $16,920 limit. But once you turn 66, the earnings limit disappears and you’ll get credit for benefits that were withheld in the past.
8. Use free online calculators to inform your decisions about Social Security…
AARP’s interactive calculator allows you to pop in your specifics and it will give you a decision tree to help you figure out the optimal time to take Social Security. Check it out to help yourself or a parent.
9. …Or pay an expert for help
If you are looking for a more comprehensive approach to give you specifics on when it would be best to start drawing on your benefit, check out Maximize My Social Security. There are different levels of analysis that you can choose, but $40 gives you access to sophisticated software that helps determine the best time to start receiving your checks. They also offer a money-back guarantee if you aren’t satisfied.
10. Don’t forget the spousal benefits
Even if he or she has never worked under Social Security, your spouse may be able to get benefits if he or she is at least 62 years of age and you are receiving or eligible for retirement or disability benefits. He or she can also qualify for Medicare at age 65.
More info about spousal benefits is available at SSA.gov.
11. Pay off your debt today
Nobody wants to go into retirement with back-breaking debt. If you’re still paying high interest rates, like on a credit card, get a lower interest card if you can qualify and transfer the balance.
Look at that box on your monthly statement and see what you’d have to pay to be debt free in three years. Then resolve to pay that each and every month. You need to budget money to pay down your debt just as you would budget for rent or a mortgage or a car payment.
12. Try to estimate what your tax situation is going to look like down the road
Starting in 2017, high-income earners must pay taxes on the first $127,200 of income. That’s up from paying taxes on the first $118,500 they earned in 2016.
On the other side of the issue, there’s been the case raised about the rich getting unfair amounts of Social Security themselves. The Washington Post’s Allen Sloan ran the numbers and found that in reality the typical wealthy person who gets Social Security benefits has paid in much more than he or she will get back in benefits.
Using himself as a test case, his research shows the ‘rich’ get back between 50 and 75 cents on every dollar they paid in.
As the decades go by, taxes are likely to only get higher. That’s why saving after-tax money today in a tax-free vehicle like a Roth IRA is a great idea.
Read more: 7 things debt-free people never do