As a federal employee, your future retirement income will be based upon your annuity payments, withdrawals from your Thrift Savings Plan, and Social Security benefits. It makes sense to max out your potential retirement income by stashing as much as possible in your Thrift Savings Plan, and working enough years to qualify for your best possible annuity payment.
But what about Social Security? What can you expect, with regard to benefits, and is there any way to maximize those payments?
First, let’s review the maximum possible Social Security benefit. This amount does change regularly, whenever Social Security releases a Cost of Living Adjustment (COLA). Currently, the maximum benefits for 2019 are…
- $2,861 if you file for benefits at full retirement age (65 to 67, depending upon when you were born)
- $2,209, if you file for benefits early, at age 62
- $3,770, if you wait until age 70 to file for benefits
Remember, these figures will change in future years, if COLAs are issued.
But will you actually reach those maximums? Many people will not, because Social Security payments are calculated based upon several factors such as the length of your career and your earnings each year. But you can increase your potential benefits by taking these steps:
Work for at least 35 years. Benefits are calculated based upon your 35 highest-earning years, so if your career was shorter than that, zeros will be averaged into your formula. Of course, working even longer than 35 years can boost your chances of higher earnings being used in your calculations.
Earn as much as possible. For 2019, the maximum taxable income for Social Security is $132,900. Earning more than this amount won’t increase your future Social Security payments, but earning up to the maximum each year will help you earn a greater benefit someday. Of course, keep in mind that this maximum taxable income has increased over time. You didn’t need to earn this much 20 years ago; the important thing was that you earned as close to the maximum as possible in those years.
Wait to claim benefits. As you can see from the figures above, the maximum possible payment varies greatly based upon the age at which you claim your benefits. Waiting just another year or two can make a considerable difference in your Social Security benefit amount.
The maximum Social Security benefit is simply that; it’s a maximum possible amount, and everyone won’t reach it. The point of sharing this information is to help you understand how Social Security benefits are calculated, and to offer guidance on increasing your future payments as much as possible for your situation. Schedule a meeting with us to get a better estimate of your own future benefits, and to plan for a retirement that suits you.
