How to Increase Your Social Security Benefits

Maximize your income with a Social Security payout increase

Couple looking at documents
••• Pascal Broze

One out of five people in the U.S. receives Social Security payments. While many of these people are retired, others have permanent disabilities or are dependents of workers who have died. Social security was created as a safety net for workers and their survivors.

Social security provides income that increases with inflation. Even a small increase in your initial benefit will result in a larger payment each year after you retire. Taking certain actions now and later will allow you to increase the amount of Social Security benefits you will receive. This can help boost your financial security in retirement.

Key Takeaways

  • You must work in a job covered by Social Security and pay SSA taxes to earn the 40 credits required to receive Social Security retirement benefits.
  • If you want to increase your Social Security benefits by 24% or more, delay retirement until your full retirement age (FRA).
  • If you aren't married, but you were in the past for at least 10 years, you may still be able to file for spousal or survivor benefits.
  • Under IRS rules, some people will have to pay federal income tax on up to 50% of their Social Security benefits. 

Expand Your Earnings

The Social Security Administration (SSA) relies on a system of credits to figure out if you qualify for payments. The rule is that you must work in a job covered by Social Security and pay SSA taxes to earn the credits. People born in or after 1929 need 40 credits in total to get benefits. In 2021, you earn one credit for every $1,470 you earn. You can earn up to four credits in a year. That means you can get the most number of credits in a year by earning only $5,880.

Keeping a steady job will allow you to receive 40 credits pretty easily over a 10-year period. If you work for more than a decade, you could earn well over 40 credits during your working years. Extra credits do not change the amount you will get.

You don't need a high income to get benefits when you retire. The more money you make before you retire, the more your monthly SSA payouts will be, up to a point. This is because the SSA figures out your benefit amount based on the 35 years where you had the highest average indexed monthly earnings (AIME). The SSA then applies a formula to the earnings to figure out your principal insurance amount (PIA). The PIA is then used to derive your monthly benefit amount.

Income over the maximum taxable earnings amount, which changes every year, is not taken into account when determining how much money you will get. Reaching that income threshold is a worthwhile goal. Doing this can help you increase the amount of the payment you'll receive when you retire from your job.

Keep on Earning

The SSA uses the 35 years of work history when you earned the most to figure out your AIME. This number is used to figure out your PIA and the monthly amount of money you will get when you retire. This amount is based on your average monthly income. If you earned no income in certain months, your average earnings will go down. In contrast, a higher monthly income will raise your average earnings and result in a larger payment each month. To increase your SSA payments, aim to build 35 years of work history. Try to have few or no long stretches where you don't earn an income.

Find and correct periods of low or no income as early in your career as you're able to increase your average monthly earnings and get the highest amount you can to retire on.

Delay the Day You Retire

If you want to increase your SSA income by 24% or more and you still want to work and are able to do so, don't retire right away. The SSA grants delayed retirement credits to people who wait until they are past their full retirement age (FRA) to take SSA payments.

These credits apply because once you reach your FRA, your payments do not cap out. FRA is figured out by your date of birth. It is age 67 for anyone born in 1960 or later. It is reduced by two months for every year before that. The FRA drops no lower than age 65 for those born in or before 1937.

For each year after your FRA that you delay taking payments, you will receive an increase in the PIA of 5.5% to 8% per year. The amount depends on when you were born, which raises your payout amount by a fraction of 1% every month. For instance, someone born in 1943 or later gets an 8% annual increase in PIA, which amounts to a payout increase of two-thirds of 1% each month. There is no point in waiting past age 70 to file, as these increases are not given past that point.

Even if you decide to delay getting Social Security payments past your FRA, you should still sign up for Medicare in the seven months that starts three months before the month in which you turn 65. For instance, if you turn 65 in September 2025, you can sign up anytime from June to December of that year.

Coordinate With Your Spouse

If you are married, you and your spouse need to decide as a team how you want to receive Social Security payments. By using survivor and spousal benefits, married couples who coordinate their payment options are likely to increase their benefits more than those who don't.

Survivor Benefits

The survivor part of SSA gives the spouses of workers the retirement benefits of those who have died. Most of the time, widows and widowers are eligible for reduced payments at age 60. By waiting until you reach full retirement age to begin survivor benefits, you can get a higher payment each month. If you are eligible for retirement benefits on your own, and your benefit would be higher than your survivor benefit, you can also switch from the survivor benefit to your retirement benefit at age 62.

Combine Benefits

If your living spouse is collecting benefits, you may also be able to claim spousal payments whether you qualify on your own work record or not. If you can get SSA money on your own, but your spousal payments are higher than your retirement benefits, getting spousal benefits would allow you to combine benefits that add up to the higher spousal amount.

Likewise, if one of you reached age 62 before January 2, 2016, then you may be able to use a filing strategy called a restricted application to collect spousal payments for a few years. You would then switch over to your own benefit amount when you reach 70 to get the delayed retirement credits and a higher payout.

Get Payments for an Ex-Spouse

If you aren't married, but you were in the past for at least 10 years, you may still be able to file for spousal or survivor benefits. They would be based on your ex-spouse's earnings. Too many divorced people are not aware of their payment options based on an ex-spouse's earnings record. Look at all your choices so that you can claim in a way that makes the most of your income when you retire.

Limit Your Taxes

Under IRS rules, some people will have to pay federal income tax on up to 50% of their benefits. Some may even have to pay 85% tax on their SSA payments if they make a large amount of combined income.

The IRS decides combined income by adding nontaxable interest and half of your SSA payments to your adjusted gross income. If your combined income is between $25,000 and $34,000 as an individual filer or between $32,000 and $44,000 as joint filers, you would pay tax on up to 50% of your benefits. If your combined income is over the upper limit of these ranges, you would pay tax on up to 85% of your benefits.

Make sure you don't have too many other forms of income when you retire. You can spread out other income you earn over a period of years, rather than receiving it all at once. Using this method can help you limit taxes on your payments and keep more of your SSA income. For instance, if you have a 401(k), don't take too much of it out in one year.

Doing the Math

The best way to get a ballpark figure of your future SSA payments and how increases can affect them is to use an online Social Security calculator. For example, the SSA Quick Calculator projects your benefit amount based on your date of birth, current earnings, and the date you will retire. Plug in a few values to see how your choices may impact your payment amount.

As you get closer to the day you retire, include your payment amount into an income plan that includes your assets and other sources of income. You'll get a full picture of what your bank account will look like once you decide to retire.

The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state‚Äôs laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.