3 Social Security Strategies to Bankroll Your Retirement

(Christy Bieber)

Once the checks stop because you retire, you need money from somewhere. Social Security is an important source of income for most seniors because if you qualify for benefits, the funds are guaranteed until you die.

So how can you use Social Security to fund your retirement? Here are three steps to follow.

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1. Be realistic about what Social Security can do

The first and most important part of your plan for a secure retirement with Social Security is understanding that your benefits alone aren’t going to cut it.

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Most people replace about 40% of their pre-retirement income with their Social Security checks. Unless you think you can easily take a 60% pay cut — which most financial experts don’t think is possible — you’ll need supplemental funds from other sources.

So while you can (and should) try to get the most out of Social Security, you also need a plan to get money from other sources. For most people, that means investing in a 401(k), IRA, or other retirement savings account.

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2. Increase your earning power

Although you can’t live on Social Security alone, your decisions throughout your life have a big impact on the money these benefits provide. In fact, if your goal is to maximize your retirement checks, you’ll want to make sure you’re focused on increasing your income and earning as much as possible over as many years as possible.

Your Social Security benefits are based on a percentage of the average wages adjusted for inflation in the 35 years you earn the most money. So, look for ways to get extra money early in your career as you can and try to increase your earning capacity by asking for promotions or raises and looking for better job opportunities.

If you’ve been able to increase your earnings over time, you should also consider working longer hours at your highest paying job. If you do, some of these higher-earning years can be part of the 35-year period used to calculate your benefits while you eliminate some lower-earning years, so these lower-earning years don’t drag down your average salary.

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3. Build up your delayed retirement credits

Finally, there’s one more thing you can do later in life that will have a big impact on how far your Social Security benefits go. You can wait to claim them. You can first start Social Security checks at age 62. However, every year you delay starting your checks until you’re 70, you end up increasing the amount of money coming in.

You have a full retirement age, which depends on when you were born. If you start checks early, benefits decrease by up to 30% if you get your first payment at age 62 when your FRA is 67. On the other hand, if you delay, it’s possible to increase your benefits for every month you wait up to 70. So you can increase your payments by up to 24% if you have an FRA of 67 and wait.

Delaying applying for benefits as long as possible ends up being the best option for most seniors, even if it means losing some controls early on. So consider delaying if possible for you.

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By taking these steps, you can make sure your Social Security benefits give you plenty of money to live on, along with the savings you’ve set aside for your future.

The $18,984 Social Security bonus that most retirees overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: One simple trick could pay you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we think you can confidently retire with the peace of mind we seek. Click here to find out how to learn more about these strategies.

The Motley Fool has a disclosure policy.

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