When you work, some of your income (currently 6.2% of eligible wages) is withheld for Social Security tax. When you retire, you're eligible to get a Social Security benefit, which is a source of income based on your 35 years of highest earnings. Social Security uses a formula to determine how much you're eligible to receive when you reach your full retirement age (FRA), which is from 66 to 67—depending on when you were born.
Although these calculations sound complex, in its recent article “How to boost your Social Security benefit,” Vanguard says there's something easy you can do to up your benefit: DELAY IT!
Hard to believe, but delaying your Social Security benefits as long as possible is the best thing for many retirees.
The Social Security Administration reports that nearly 75% of retirees who receive benefits take reduced payments because they filed before reaching FRA. If you wait and take your benefits at age 70, you easily can maximize your benefit. If you continue to work between ages 62 and 70 and earn more than ever before, the numbers used to calculate your lifetime earnings will increase, which may up the benefit you're eligible to receive when you decide to collect benefits.
Our Social Security program was created for and is funded by U.S. workers. Right now, there are about 40 million workers who receive benefits. You want to be among those who receive the most benefits, and you can be. With some smart planning about how you plan to live in retirement, you can be confident that you will get everything you deserve.
Reference: Vanguard (June 21, 2016) “How to boost your Social Security benefit”