You could double your monthly Social Security benefit by making these 2 choices

Among our nation's social programs, arguably none stands as more important to seniors than Social Security. The guaranteed monthly income that the program provides to just over 42 million retired seniors each month is critical in helping them make ends meet during their golden years. An analysis conducted by the Center on Budget and Policy Priorities found that senior poverty rates are just 8.8% with Social Security income, compared with an estimate of 40.5% if those same monthly payments weren't there. 

Furthermore, statistics from the Social Security Administration (SSA) show that 48% of married elderly beneficiaries, along with 71% of unmarried elderly beneficiaries (61% combined), are reliant on their monthly paycheck from the SSA for at least half of their income. Leaning so heavily on Social Security isn't advised, but given Americans' poor saving habits and how few are consistently investing in the greatest long-term wealth creator -- the stock market -- this figure isn't surprising.

Social Security facts you should know
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Social Security facts you should know

1. Over 62 million Americans will receive $955 billion in benefits in 2017

To begin with, understand that around a quarter of the federal budget ($955 billion) is being diverted to Social Security on an annual basis. This $955 billion is predominantly generated from a 12.4% payroll tax on earned income (87.3% of all revenue came from payroll tax income in 2016), while interest income on the programs' $2.85 trillion in asset reserves and the taxation of benefits make up the remainder. 

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2. 171 million workers are covered by Social Security

The SSA wants you to know that the Social Security program covers a lot of working Americans. To qualify for Social Security benefits, you only need to collect 40 lifetime work credits. You can earn up to four credits annually, with each credit being valued at $1,300 in earned income in 2017. In other words, working part-time for 10 years could ensure that you'll be receiving Social Security benefits when you retire.

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3. Retired workers account for 71% of benefits paid

As you might have rightly expected, Social Security is primarily designed to provide a financial foundation for lower-income seniors during retirement. This year, an estimated 71% of the $955 billion being paid out will be headed to retired workers. Social Security payouts accrue by 8% per year beginning at age 62 and continuing until age 70, meaning a smart way to boost your payout, if you're nearing retirement, is to wait to enroll. Working at least 35 years and earning as much as you can annually when you are working, can also boost your benefit. 

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4. Disabled workers and survivors comprise the remainder

However, you should fully understand that the disabled and survivors of deceased workers also receive a pretty sizable component of this $955 billion pie. As of this past June, the disabled accounted for 10.5 million beneficiaries, while survivors tallied another 6 million. The disabled will receive about 16% of the $955 billion in 2017, with survivors getting the remaining 13%. 

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5. Approximately 90% of workers are protected in the event of a long-term disability

According to the SSA, a little more than a quarter of today's 20 year-olds will become disabled before they reach their 67th birthday. What's more, 67% of the private workforce has no long-term disability insurance in place. Thus, it's probably a godsend that Social Security is currently covering about 90% of workers ages 21 to 64 in the event of a long-term disability. If you have 40 lifetime work credits, you're taken care of. For younger folks who may not have hit that mark, a staggered lifetime work credit total, based on your age, may allow you to qualify. 

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6. Roughly 96% of those aged 20 to 49 have survivors insurance protection

In addition, about one in eight 20-year-olds won't live to see their 67th birthday. However, the SSA notes that practically all workers (96%) between 20 and 49 who worked in covered employment as of 2016 had survivors protection insurance for their young children and surviving spouse in case of an untimely death. Survivor benefits can be especially useful for widows, since women are far more likely to stay home to raise their children and take care of sick friends and family. Rather than rely on their own work benefits, which may be adversely affected from taking time off from their career, they may be able to take survivor benefits based on their spouse's income, assuming the survivor benefit is higher.

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7. 61% of seniors rely on Social Security for half their income

It's no secret that retired workers are exceptionally reliant on Social Security income to make ends meet. According to the latest fact sheet from the SSA, 48% of married couples and 71% of unmarried elderly folks count on their benefits check for at least half of their monthly income. That's 61% of all senior citizens leaning on Social Security for half of their income, if not more. 

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8. 43% of unmarried seniors are almost wholly reliant on Social Security

Speaking of those who are "more" reliant, some 21% of married couples and 43% of unmarried seniors rely on Social Security for at least 90% of their monthly income. That's an astoundingly high figure, and it's increasingly worrisome given that the 2017 Board of Trustees report estimates that a benefits cut of up to 23% may be needed by 2034 should Congress fail to pass new revenue-generating legislation. 

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9. The average 65-year old will live about 20 years

Another worrisome issue for retirees is that many may be failing to factor in increased longevity. Back in 1960, the average American's life expectancy was less than 70 years. Today, it's nearly 79 years. In fact, if you make it to age 65, you have a pretty good chance of living nearly 20 extra years. Will you have the income necessary to take care of your financial obligations if you live until age 85? Social Security may simply not offer enough income to ensure you can, since it's only designed to replace about 40% of your working wages. 

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10. The elderly population is set to grow by 65% in 18 years

Making matters even more precarious, the elderly American population in this country is set to explode, given the retirement of baby boomers and an improvement in medical care, medicines, and medical care access. Right now, there are approximately 48 million people aged 65 and up, but by 2035 that figure is expected to climb to 79 million. That's a 65% increase in 18 years, and it's going to be a major strain on the Social Security program. 

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11. The worker-to-beneficiary ratio will decline by 21% by 2035

As the number of mouths to feed increases for Social Security, the number of workers providing that all-important payroll-tax revenue won't be growing by nearly enough to offset the baby boomer exodus from the workforce. Between 2017 and 2035, the SSA is estimating that the worker-to-beneficiary ratio, which currently sits at 2.8-to-1, could fall by 21% to 2.2-to-1. Raising payroll taxes on the wealthy, or all workers, is one solution that could help hedge against this beneficiary ratio decline. 

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12. 31% of workers report having no money set aside for retirement

Lastly, and this just adds fuel to an already burning fire, the SSA reports that nearly a third of all workers (31%) don't have a red cent saved for retirement, meaning they're on track to be wholly reliant on Social Security once they retire. Once again, Social Security could be just 17 years away from a 23% across-the-board cut in benefits if Congress doesn't get its act together. That's scary for these folks who aren't saving and creating a secondary channel of income for retirement.

Long story short: Social Security probably covers a lot more than you thought, but it was never designed to be your primary source of income during retirement.  

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Two simple ways to double your monthly Social Security benefit

In effect, it means today's working Americans and pre-retirees need to do everything they can to maximize what they'll be paid by the SSA once they retire. However, according to the July 2017 snapshot from the SSA, the average payout to retired workers a month was just $1,369.97. On an annual basis, we're only talking about $16,439.64 a year, which is above the federal poverty level but not by a lot, all things considered.

Yet, there are two simple choices that working Americans can make today that could have a remarkably large impact on their Social Security payout once they retire. In fact, it may even double what they'll receive each month.

1. Claim at age 70

The first choice is to avoid the herd mentality and to wait as long as possible to enroll for benefits.

Eligible workers who've accumulated the prerequisite 40 lifetime work credits can enroll for benefits with the SSA beginning at age 62 or at any point thereafter. However, there's a big dangling carrot for those who wait to claim. For each year that seniors wait to sign up, their eventual monthly payout grows by 8%. This means, birth year, income, and work history being equal, a retired worker who takes benefits at age 70 could earn up to 76% more per month than the same worker enrolling at age 62. That's a huge "raise" that you can give yourself by just being patient.

However, few retired workers are patient. Aggregated data from the Center for Retirement Research at Boston College shows that roughly 45% of workers enroll at age 62, with at least 60% signing up before their full retirement age (the age at which the SSA deems a person eligible for 100% of their benefit). This means, at minimum, 60% of retired workers are taking a permanent reduction from their full retirement age payout. On the flip side, just 3% of retired workers are maximizing their payout and waiting until age 70 to file for benefits.

For some folks, signing up early and not waiting for age 70 does make sense. If you're in poor health, are struggling to find work and therefore generate income, or are a lower-earning spouse, then enrolling at an earlier age can be a smart move. But if you're in good health, have an insufficient nest egg, or are the higher-earning spouse, waiting until age 70 to enroll could be a great choice.

2. Work a few extra years in your 60s

The second choice you can make that could have a markedly positive impact on your monthly Social Security benefit is to work a few extra years.

Aside from your claiming decision discussed in the previous point, the other two factors you control that affect your payout are your work and earnings history. The SSA will take into account your 35 highest-earning years in calculating your monthly payout, meaning you'll want to work at least 35 years and earn as much as you can annually, in order to pump up your payout. For each year less of 35 worked, a $0 is averaged in by the SSA.

Working into your 60s could come with two key advantages. First, working more than 35 years could allow you the opportunity to replace a year of lower earnings when you were younger with a year of higher earnings. Just as important, when you're in your 50s and 60s, you've probably gathered key work skills and experience that can net you a higher annual wage or hourly pay rate. Working more in your 50s and 60s could really pump up your earnings history and eliminate lower pay years from when you were younger and lacked the skills and experience to net a good wage.

As a quick example, I utilized the Social Security Quick Calculator to estimate monthly benefits (in today's dollars) for a person born in 1970 with a full retirement age of 67. The average American earns about $30,000 annually, which leads to an estimated payout of $1,569 a month if claiming at age 70. For each $1,000 increase in average annual earnings, the SSA's Quick Calculator estimates a $31 or $32 bump up in average monthly payout for our fictitious retiree. Increasing your average annual payout from say $30,000 to $37,000, along with waiting until age 70 to claim, could double what you would have received by following the majority and claiming at age 62.

Once again, as a reminder, Social Security isn't designed to be a primary income source. But if it will be for you, be smart with how you approach your claim for benefits and try to work as long as possible to boost your average annual earnings that the SSA will use in calculating your payout.

The $16,122 Social Security bonus most retirees completely overlook
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