While greater Social Security cheques won’t cover all of your expenditures in retirement, they will make your life simpler. Even if you aren’t of qualifying age yet, you have a great deal of influence over the amount of your benefit. So anything you do today to raise your income will help you get more Social Security payments in the future.
However, this isn’t the only strategy for increasing the program’s money. Another easy step you may take might boost your Social Security benefits by $1,830 per month.
Social Security Benefit Calculation
Your Social Security benefit is calculated based on the (AIME). It is your own monthly average income taking inflation into account over your 35 highest-earning years.
The government uses your AIME to calculate your benefits based on your birth year. The formula for persons turning 62 in 2022 is as follows:
- Multiply your AIME’s first $1,024 by 90%.
- Next, multiply any value over $1,024 up to $6,172 by 32%.
- Any payment over $6,172 should be multiplied by 15%.
- Add up the sums from steps 1 to step 3 and round off to the nearest dollar.
The bending points in the calculation above are $1,024 and $6,172. These vary from year to year. However, the remainder of the benefit calculation remains constant.
If you apply at your full retirement age, the results of this method will tell you how much you can collect from Social Security. Based on your birth year, this is between 66 and 67. However, not everybody claims.
Suppose you enroll before or after your full retirement age. In that case, the government multiplies your social security benefits amount by another formula to estimate how much you’ll actually gain or lose out of each check.
Beginning early reduces your benefits by 5/9 of 1% per month for the first 36 months. You’ll miss an extra 5% per month if you register more than 36 months before your FRA. If you enroll for Social Security at the age of 62, you will only receive 70% of your maximum benefit per paycheck if your FRA is 67, or 75% of your FRA is 66.
If you wait until after your FRA, your benefits will increase by 2/3 of 1% per month, or around 8% per year. This persists until you reach the age of 70 when you are eligible for the total payout. If your FRA is 67, you’ll get 124 percent of your entire benefit every check, and if your FRA is 66, you’ll get 132 percent.
Method To Increase Social Security Benefit
In 2022, the highest Social Security benefit will be $4,194 per month. One should have received at least a predetermined sum every year at least 35 years to qualify for this. The figure for 2022 is $147,000, with previous years’ amounts rising in step with wage inflation. It takes a lot of work to build up that kind of earnings history, but those who do it and wait until they’re 70 can get the biggest payouts from the program.
However, patience is required. If anyone with the same earnings registers at the age of 62, they will only receive $2,364 per check. It still is a substantial sum, but it’s far less than the max – $1,830 less, to be precise.
On the other hand, Delaying payouts will not net the ordinary person nearly as much money. If your FRA was 67 and you were eligible for the average $1,661 payment at 62, waiting until 70 would increase your benefit to nearly $2,943 per month. This equates to a $1,282 difference. However, that is still a substantial sum of money, sufficient to make a significant difference for most people’s retirement benefits.
