According to numerous surveys, many U.S. employees are woefully behind on their retirement savings. It’s not a pleasant feeling to be in that position. You’ll most likely ask when you can retire and what kind of lifestyle you’ll have after you leave the workforce if you don’t have adequate money set aside.
If you’re over-50 and on a fixed income, maximizing your savings is essential, but there’s another, equally important approach to consider. Increasing your Social Security pay is one way to do it. Taking smaller annual withdrawals from your retirement account enables you to receive a higher monthly payment. Taking less from your savings account each year should help you stay afloat for longer.
1. Work at least 35 years
If you’ve been working for less than 35 years, reaching the 35-year mark will naturally raise your average pay. This is because you’ll add in greater values for the zero-income years in the average salary calculation.
2. Get a higher-level job
A modest merit raise in your current job may not have a significant impact on your retirement benefit. What you want is a raise sufficient to keep up with inflation. That might imply a promotion.
The good news is that a promotion-related compensation increase will improve your earnings in the current year and, perhaps, in future years. The greater the number of years you can work at a higher income level, the larger your retirement benefit will be influenced.
You may also use the extra cash to increase your retirement contributions, which is a plus.
3. Add part-time income
Sometimes, adding part-time employment to your schedule is simpler than requesting a raise. For example, you might be able to pick up some consulting or contract work if you have experience in a technical field. Alternatively, try working for a ride-hailing service, gardening, or handyman services to make more money.
Extra earned income, whether you choose self-employment or a regular part-time job, is taxed. Self-employment taxes are levied on all self-employed earnings.
There’s no telling how long it will be until you’re eligible to retire. Your company may offer a higher benefit in the meantime, however if you implement this approach early, you should notice a significant difference in your payout.
Projecting your potential benefit increase
Social Security provides a variety of tools for projecting your retirement benefit at various income levels. My Social Security’s benefit estimator is the most precise. The calculator determines your expected benefit using your reported earnings history.
The Estimator also takes into account the prior year’s average yearly salary, which is usually about what you earned in past years. You may manually alter this statistic to see how your estimate changes. Experiment with various average future income figures to determine how much money you’ll need to meet your desired retirement benefit.
There are several drawbacks to continuing your profession, obtaining a more complex job, or working longer hours. Projecting the prospective bonus onto your Social Security benefit may help you decide if those expenses are worthwhile.
If you think the sacrifices aren’t worth it, consider making a passive income stream to help supplement Social Security and your savings payouts. Alternatively, you may downsize now to decrease your future living expenses. This would also allow you to contribute more money to your retirement account.