The first thought most people have about Social Security these days is that it won't be there to pay them by the time they retire. But if you wait until your 60s to figure out the ins and outs of your retirement benefits, it'll be too late to do anything to change them, regardless of what happens to the program in future years.
Taking action now can help you boost your benefits. To get as much money as you can from Social Security, here are four things to do:
1. Earn as Much as You Can
Your Social Security benefits are primarily based on how much money you earn throughout your career. To calculate your benefit, the government takes your 35 highest-earning years, makes some adjustments, and then figures out what your average monthly earnings were.
It then applies a formula to that average to figure out what's called a primary insurance amount. That number represents what you'll get if you start taking payments at your normal retirement age -- currently 66 for those born between 1943 and 1954.
But the formula doesn't reward every dollar of earnings equally:
- For low-wage earners, the formula gives you about $0.90 for every dollar of average earnings.
- Above a certain point, though, middle-income workers will only get about $0.32 extra for every dollar of additional earnings.
- For high-income earners, the extra benefit falls to $0.15 on the dollar.
What that means is that while earning more is always good for your benefits, some earnings will help more than others. If you have a number of low- or no-income years in your career, working extra could help boost your benefits. But if you already have 35 well-paid years in your history, working more might not do you any good.
2. Wait -- If You Can
Another simple way to boost your benefits is to wait as long as you can before taking them. Doing so can make a huge difference in your monthly check.
For instance, if your normal retirement age is 66 but you retire four years early at age 62, the government will cut your monthly benefit by 25%. Moreover, your spouse's benefits will take a 30% hit.
On the other hand, if you work beyond age 66, the government gives you even more benefits. For each year you work beyond normal retirement, your benefits rise about 8%. And you can wait as long as age 70 and still get added benefits.
So on a monthly benefit of $1,000 at age 66, retiring early versus late can mean the difference between $750 and more than $1,300. That's a nice reward to encourage you to wait.
3. If You're Married, Look at Your Spousal Benefits
Many families have two wage-earners. Because married couples can collect Social Security based either on their own earnings or their spouse's earnings, you may have an opportunity to boost your total payments.
Ordinarily, the government will figure out which benefit is higher and just pay you the greater amount. But one thing you can do is to delay taking your own benefits but take your spousal benefits. By doing so, you both get paid now as well as earning the extra benefit credits from waiting on your own benefits.
4. Watch the Work Rules
If you're collecting Social Security but also working, be careful. If you earn too much, you could end up forfeiting some of your monthly benefit check.
From age 62 until your normal retirement age, any earnings above a certain limit -- just over $14,000 for 2011 -- cut your total benefits for the year by $1 for every $2 you go over the limit. A higher limit applies during the year you reach normal retirement. Then after that, you're home free and can work as much as you want while also taking benefits.
Some things about Social Security are beyond your control. But by keeping these simple ideas in mind, you can make the most of whatever Social Security gives you after you retire.
Motley Fool contributor Dan Caplinger is always looking for ways to give you more. You can follow him on Twitter here.