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So you’re telling me this Social Security thing that I’ve been paying into my whole life isn’t set aside for me? And not only that, but it could be taxed, cut, raised, or calculated at different rates? Don’t lose half a million in Social Security. Understand your Social Security benefit.

Hi, I’m Hunter Brockway, founder of Boca Retirement Strategies, here to help set you up for a successful, stress-free retirement while spending more and avoiding being killed in taxes.

If you’ve worked, you’ve likely paid into Social Security. But Social Security isn’t quite a fixed pension, and many variables go into calculating your benefit. Currently, the max benefit is $3,822 per month. Missing out on half of that could be a half-million-dollar mistake across a 30-year retirement. Let’s make sure you understand how Social Security works so that you can get the most out of your benefit.

For starters, Social Security is taxed based on a special payroll tax. It is taxed at a rate of 6.2% of every dollar earned up to $168,600 in 2024. An additional 6.2% of your wage base is also paid by your employer, which goes into the Social Security system but not into a special account for you. You can view your Social Security benefit or account at ssa.gov to estimate what you will receive in benefits.

Your Social Security benefit is calculated on your 35 highest years of earnings. You need to work at least 10 years to be eligible to receive benefits. Any years between 10 and 35 that you do not work count as a zero when calculating your average highest 35 earning years. So, said differently, of what we’ve covered so far, if you made $2 million per year for 10 years and then stopped working, your Social Security benefit is calculated at $168,600 for 10 years, then at $0 for 25 years—not the highest eligible benefit.

Social Security taxes are also weighted, meaning the first dollars of your wage base used to calculate your benefit are worth more of a benefit than the last dollar out of $168,000 of income. The Social Security wage base changes with inflation, so the max $168,000 wage base today wasn’t the same wage base a handful of years ago. Social Security benefits also change with inflation as a percentage of your lock-in benefits. This is known as your cost of living adjustments, or COLA. So if you locked in the max benefit of $3,820 today, then next year they raised the max benefit by 2%, you would receive a $76 raise in your benefits. The same is true if your base benefit was lower. If you locked in your benefit at $1,800 per month, you would see a 2% raise as well, but that’s equivalent to a $36 raise as opposed to the $76 raise.

That’s why it’s important to lock in the highest benefit and get raises on top of raises, so long as that makes sense for your situation. Social Security benefits are eligible for early withdrawal at 62 for your own benefit and at a penalty. That penalty is a permanent 30% reduction to your benefits. Backing that up to our last point, that means a cut of potential future COLA raises as well. Full retirement age is between 66 and 67, depending on your year of birth. Full retirement age means eligible for 100% of your benefit. The max Social Security benefit age is 70, with a bonus of about 8% per year that you wait compared to your full retirement age. Again, going back to COLAs, this means raises on top of future raises.

What are the easiest ways to increase your Social Security benefit? Before I dive in, I would greatly appreciate it if you subscribed to our YouTube channel. The first way is to work a full 35 years, even if it’s part-time work. Remember, if you don’t work, it’s a zero, and also remember the first dollars are weighted more heavily. Two, wait longer to claim. Every year you wait past 62 up to 70 is a year of your benefit growing. Three, create a claiming strategy to include spousal benefits. Don’t forget you may be eligible for survivorship and divorce benefits. Claiming at the same time as your spouse isn’t particularly a strategy. Four, survivor benefits can be claimed as early as 60, then your own benefits can be claimed later if eligible. This gets you your survivor benefit plus allows your benefit to grow or vice versa.

I’m Hunter Brockway from Boca Retirement Strategies. If you would like a personalized retirement income strategy to get the most out of retirement, you can start by booking a simple 15-minute call on our website at bocaretirement.com or sending us an email at contact@bocaretirement.com. We are based in South Florida and Western Massachusetts and work with clients scattered throughout the US. Enjoy your successful retirement, and thanks for watching. Bye.