If you want to maximize the income Social Security provides you, there’s one number you need to know: 35. Here’s why it’s the most important number in your retirement calculations.
Why is 35 key to getting the greatest amount of Social Security benefits?
You need to know the number 35, because that’s the minimum number of years you’ll have to work to avoid shrinking your monthly Social Security check.
Look, the benefits are based on your average wage in the 35 years you earn the most. The Social Security Administration adjusts your earnings for inflation throughout your career. Then the SSA calculates your average indexed monthly earnings (AIME) over the 35 years in which you had the highest earnings. And you will receive a benefit equal to a percentage of that amount.
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You are still eligible for benefits by working for much less than 35 years. Only a minimum work history of 10 years is required to get Social Security checks. But regardless of how long you actually worked, the benefit is always determined on the basis of the 35-year formula. So if you only worked for 10 years, you would have included a whopping 25 years worth of $0 pay when calculating your average pay. Your benefit would therefore be very low.
Ideally, you should try to work beyond these 35 years as chances are there will be times during your career when you don’t earn much. For example, if you earn a very low starting salary for the first three years, but your income has risen sharply and you decide to work for 38 years, those first three years will not count towards your average wage. Years later, they would be driven out by more deserving years.
But if you don’t want $0 in your average, you have to put in at least 35 years before you claim benefits.
Why is this number more important than others?
Your average wage is just one factor that determines how much your benefit will be. As mentioned above, your standard benefit is equal to a percentage of that average wage. But your standard benefit may be affected by when you apply for the check. You have a designated full retirement age (FRA), which is between 66 and 67 years, depending on your year of birth. If you claim benefits before full retirement age, your standard benefit will shrink. If you apply for a benefit after FRA, your standard benefit will increase.
That is why your full retirement age is important. But it’s not as important as a 35-year employment history. If you claim benefits early, it is true that your checks will shrink, but you will receive more payments, even if they are smaller. If you wait, your benefits will increase — but you won’t get as many checks. For years, the extra you get each month is just used to make up for lost income.
So while your claim age does matter, the program is specifically designed so that if you don’t outlive your life expectancy, you should pretty much break even whether you claim sooner or later. However, working less than 35 years always means a smaller monthly and lifetime income than you would have had if you only worked a few extra years to increase your average wage.
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