Why working in your 60s can help increase Social Security


(Adam Levy)

How much you get from Social Security retirement benefits depends on your earnings history. The formula for calculating interest is based on 35 years of your highest profit indexed for inflation.

But there is one thing retirees need to know. those inflation Adjustments stop when you reach the age of 60. This can make working in your 60s even more valuable for someone looking to get the most out of Social Security benefits.

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Earning in dollars today

You have the opportunity to earn inflation-adjusted dollars today by working in your 60s while the rest of your past earnings are no longer adjusted for inflation.

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If you turn 60 in 2023, you will likely have earnings going back to the 80s.

Let’s say you started your career in 1986 with a salary of $25,000. Based on the Social Security Wage Index, this earnings will be calculated as $84,788 in your benefits account. But that is the maximum amount they will ever be worth.

This will probably equal your earnings in 2022. But if you get a small adjustment in your salary for inflation next year, you will earn more. Meanwhile, your past earnings will not be indexed to a higher degree. This is particularly relevant in high inflation environments.

As such, by working at age 61, you’ll increase your Social Security benefits, even without any real (inflation-adjusted) wage growth since you were 23. Of course, most people see real wage growth over the course of their careers.

Some of your highest paid years

Your 60s may present some of your biggest job opportunities. The average American earns its highest salaries in their fifties, but there are still plenty of well-paying jobs for those in their sixties.

The median income for 25- to 34-year-olds is just under $50,000 a year, according to the Bureau of Labor Statistics. Meanwhile, the average 55- to 64-year-old earns nearly an additional $10,000 a year. This is a 20% increase.

If you earn 20% more than you did in your 20s and 30s and take advantage of inflation, you will make a significant boost to your Social Security benefits.

Let’s go back to the example of someone who earned $25,000 in 1986 when he was 23 years old. By 2022, they increased their real earnings by 20% and now brought home $101,746. If a person continues to work into their 60s and gets a 3% raise on average each year, they will have earnings of $117,951 by age 65.

This will increase their average indexed monthly earnings by $79 by replacing their 23 year salary in the top 35 income years. Even just an extra $79 per month in median income translates to more than $300 in additional Social Security payments per year at full retirement age.

More likely, the average earnings increase could be much higher as ages 61 to 64 will replace other low-income years that have stopped adjusting to inflation. If that extra five years of working translates to something like a total increase of $350, that means roughly $1,350 in additional Social Security benefits per year. And if they delay benefits until age 70, the additional benefits are more than $1,650. For someone who adheres to the 4% rule, that equates to an additional $41,000 in retirement savings.

Consider your options

If you have a profitable career and you are Maximum Social Security has reached In most years, you probably won’t get much Social Security by working in your 60s. However, if you are mostly of average or even slightly above average income, you may get a lot to keep working.

You can search for your wage indexes on Social Security Administration website Based on the year in which you became eligible for benefits. If you’re on the fence between retiring early and staying on for a few more years, you can also do a little math to figure out how much you can get from Social Security by working after age 60.

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