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How to Maximize Your Social Security

Social security is a crucial part of most Americans’ retirement. Learn how you can maximize payments in six steps.

Social security is a foundational piece to many people’s retirement — and for good reason. In June 2022, nearly 66 million Americans received benefits from it. It’s a source of income via the government if you retire or can’t work. In some cases, it’s all people rely on in their later years.

While government income is often essential for retirement, it may not always be enough to pay for your lifestyle. However, there are many strategies you can employ to maximize your payments later on. In this article, we’ll explain how you can increase your benefits, such as when you take it or how long you should work. We’ll also answer common questions on the subject.

How Social Security Works

Social security, as we know it today, refers to the Old-Age, Survivors, and Disability Insurance (OASDI) program. With it, the Social Security Administration (SSA) offers financial assistance to those who are retired or can no longer work. Dependents may also be able to receive benefits after you pass away.

Your benefits replace a percentage of your previous income once you retire. But how much you receive comes down to how much you were earning and your full retirement age (FRA). The latter refers to when you’re able to receive full benefits from the SSA. Here’s when you’ll reach that age currently:

Birth YearFull Retirement Age
195566 and 2 months
195666 and 4 months
195766 and 6 months
195866 and 8 months
195966 and 10 months
1960 or later67
Note: ages above are from the SSA website.

Be aware that if you decide to start taking benefits before you reach FRA, you’ll receive less money.

As mentioned above, how much you were earning before retirement also plays a key role. For the following example, imagine that you’re at FRA and are just now starting to take government payments:

  • Low earner – 75% of income
  • Medium earner – 40% of income
  • High earner – 25% of income

How Do I Qualify?

To qualify, you’ll need to earn at least 40 credits. You’ll do this by paying social security tax on your earned income. Typically, you can earn up to four credits each year, or one every time you earn $1,730.

Ways to Maximize Your Payments

A common notion is that you’ll need at least 70% of your pre-retirement income to live a comfortable and satisfactory lifestyle after your career. Your social security will make up part of this. So, it’s essential that you maximize your monthly benefits as much as possible.

Below are six steps to help you maximize payments:

1. Work 35 Years

Benefits are based on your lifetime income. However, the SSA takes your highest-earning 35 work years to calculate your monthly payments when you reach retirement age. Typically, this means the SSA will calculate average indexed monthly earnings (AIME) to determine your payment.

If you don’t work the full 35 years, the average calculations replace the missing income with zeroes. This brings the average down because the denominator is always 35. On the other hand, if you like working and put in more time, each additional year replaces an earlier year’s pay if you made more. This will raise your average and your payment.

2. Max Out Earnings

The more money you make in your career, the higher your monthly payments will be. In addition, the income you receive while working in your 60s isn’t indexed and replaces years you didn’t work earlier in life (those zeroes), or those in which you made less.

You can bolster your benefits by doing whatever you can to increase earnings in your 60s. Take a second job, work overtime, start a business, etc. In 2023, annual income up to $160,000 is used to calculate SSA benefits. Watch out if you semi-retire or take a sabbatical or reduce your pay because this could seriously impact your social security payment.

3. Delay Your Benefits

You’ll make more money if you put off receiving benefits as long as possible until you reach FRA. Depending on your age, you could start getting monthly payments as soon as 62, or 67 if you were born after 1960.

If you can, wait until you’re 70 because your benefit increases 8% each year you delay taking a payment. Then, once you hit this age, it’ll max out. Factors that influence the decision to wait for payments include:

  • Life expectancy – if you don’t anticipate living for two to three more decades, you might want to take payments sooner.
  • Current financial needs – if you urgently need money, you may have to take payments ASAP.
  • Marital status
  • Employment status

4. Claim Spousal Benefits

If you’re married and at FRA, you can claim the higher option between 50% of your spouse’s benefits or your own. This may be ideal if your partner was a higher earner than you, which would result in larger payments.

You may also be able to claim an ex-spouse’s benefits if you haven’t remarried. If you were married to somebody for over 10 years, you can claim their social security payments if they’re higher than your own. Keep in mind that you must be at least 62 years old to do this.

5. Watch Out for Taxes

Your social security payments could be subject to federal taxes if you receive other income during retirement. This includes money from both work and investments. Depending on how much you report on your federal returns, the Internal Revenue Service (IRS) can tax 50 to 85% of your benefits. Here’s a breakdown:

  • Individual tax returns
    • $25,000 to $34,000 of income may result in up to 50% of your benefits being subject to taxes.
    • More than $34,000 may result in up to 85% of your benefits being subject to taxes.
  • Joint tax returns
    • $32,000 to $44,000 of income may result in up to 50% of your benefits being subject to taxes.
    • More than $44,000 may result in up to 85% of your benefits being subject to taxes.

6. Consider Hiring a Professional to Help

It’s never a bad idea to have a financial advisor in your corner when you’re planning for retirement. They’ll be able to work with you to develop a coherent strategy for you to maximize your social security, as well as the effectiveness of other retirement vehicles, like 401(k)s and IRAs.

For retirement purposes, a financial planner is likely a good fit. Accredited experts, such as certified financial planners (CFPs), specialize in retirement planning. They’re also fiduciaries, which means they’ll put your best interests above all else.

Free matching tools, such as this one, are an effective way to find a financial advisor near you. After filling out a short quiz, you’ll be connected with up to three vetted experts, including CFPs if they’re applicable.

Frequently Asked Questions

When am I eligible for social security?

You’re eligible for benefits once you’re at least 62 years old and have paid social security taxes on your earnings for at least 10 years. However, just because you’re eligible doesn’t mean you’ll receive maximum payments. To do this, you’ll need to reach full retirement age (see table above for when this is).

Do I have to pay taxes on my payments?

You may have to pay federal taxes on your payments if your earnings exceed a certain amount. For individual tax returns, you’ll have to pay on at least 50% of your benefits if your annual pay is $25,000 to $34,000 (or up to 85% if you make more). Or, for joint filers, you’ll have to pay taxes if your income is between $32,000 and $44,000 each year (or up to 85% if you make more).

How much can you earn while on social security?

There isn’t a specific limit for how much you can earn while you’re taking benefits at FRA. However, being under that age means you can only earn $21,240 per year as of 2023.

Once someone reaches FRA, how much they receive depends on what they earned during their career. For example, consider someone who was born in 1954 and who, in 2022, earned $75,000 from their job. Assuming their income went up incrementally over their career, they’d receive around $2,591 per month in benefits in 2024. Keep in mind that this example comes from the SSA’s quick calculator, so it’s just an estimation.

Can I collect payments and work at the same time?

Yes, but keep in mind that if you earn over a certain amount, your benefits will be taxable. Also, if you collect payments before you reach FRA, your amounts will be lower if your earnings exceed the earnings test. In 2023, this amount was 21,240.

So, if you’re willing to work, it may be smart to wait to collect social security. Be sure to speak with a financial advisor about how working while taking benefits impacts your situation.