You’ll often hear that it’s best not to retire on Social Security alone, because you might struggle to pay the bills with just those monthly benefits. And if you got an estimate of your monthly Social Security benefit a while back, you may be worried about paying your senior expenses solely on that income.
But if it’s been a while since you got that estimate and you’ve recently claimed Social Security, you may find that your payments are actually larger than you expected. Here’s why that may have happened.
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1. You delayed your claim past full retirement age
You’re entitled to your complete monthly Social Security benefit based on your individual income history when you reach full retirement age (FRA). That age is either 66, 67, or somewhere in between, depending on the year you were born.
For each year you delay your Social Security filing past FRA, your monthly benefits get an 8% boost, up until age 70. So if you didn’t sign up at FRA, but rather, waited six months or a year, it could explain why your monthly Social Security checks are now higher. And good news — any boost you snag via a delayed filing is one you get to enjoy for the rest of your life.
2. You took on a side hustle during the tail end of your career
If you found that you were nearing retirement with minimal savings, you may have opted to join the gig economy, boost your income, and put that extra money into your 401(k) or IRA. But you should know that any wages you pay taxes on count toward calculating your future Social Security benefits provided your income doesn’t exceed the annual wage cap (and you have to earn a lot for that to happen).
So let’s say that in the years leading up to retirement, you drove for a ride-hailing service and paid taxes on $6,000 a year of side income on top of your $90,000 salary. That extra $6,000 counts toward calculating your Social Security benefits, resulting in larger checks.
3. You worked a few extra years for a more robust earnings history
The monthly benefit you get from Social Security in retirement is calculated based on your 35 highest-earning years in the labor force. But for each year you don’t have an income on record, you have a $0 factored into your benefits calculation.
It may have been that you only had a 33-year work history at your anticipated retirement age. But if you made a last-minute decision to work two more years and have now claimed Social Security following that period, you may be looking at higher checks due to having a full 35 years of work on record.
Being surprised with a larger monthly Social Security benefit is a good thing. But an even better thing is to read up on ways you can boost that benefit before your career comes to an end. That way, you can set yourself up with more income and reduce your chances of struggling financially once you’re ready to exit the workforce for good.
