Your Social Security benefit at full retirement age is based on your highest 35 years of earnings. But what if there is a low or zero income year in those top 35 years? "We were really surprised at how many people have zeroes in that top 35, especially women," said Matt Rutledge, author of a new working paper from the Center for Retirement Research at Boston College.
How does that affect your Social Security?
By extending your working years, even by an extra year later in your career, you could increase your payout by raising the amount in those top 35 years. If late-career earnings replace a zero in the calculation of your benefits, you could see an increase in the benefit you're entitled to at full retirement age. That could mean 46% of women and 15% of men, who work until age 63 instead of 62, could replace a zero-income year in that calculation, according to the Boston College paper..
The big benefit of delaying is in the actuarial adjustment of when you claim Social Security in relation to your full retirement age. Claiming before your full retirement age permanently reduces your benefits; each year you delay from full retirement age until you turn, 70 boosts the total by 8%.
Someone who retires and begins claiming Social Security at age 70, would receive a benefit that's 76% higher than the one he or she would receive at age 62, according to the study. Factor in late-career earnings replacing a zero-income year, and the increase becomes as much as 88% for women and 82% for men.
Women stand to benefit most from working longer because they tend to have more zeroes in their earnings record. Women work an average 29 years to men's 38, and they spend an average 5.5 years out of the workforce caring for children, and 1.2 years out as a caregiver for an older adult.
Get a copy of your earnings record from Social Security to see how much impact late-career earnings would have on your benefit.
Keep in mind that you might also have access to benefits based on the record of a spouse or ex-spouse. That benefit could already be larger than what you'd be entitled to with a few more work years under your belt.
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