If you are still part of the workforce, it is highly recommended that you make sure to take certain steps to boost the money you will be able to rely on when you retire – that is, at least if you’d like to score fatter social security checks after you are no longer actively employed.
Naturally, the sooner you start doing these things, the better for your retirement income further down the road – which is why you should take up the three major recommendations laid out below, and stick to them for the entire remaining duration of your career.
While for those who are still of a younger age, their retirement years might seem as though they are in the very distant future, it’s vital to never be short-sighted with respect to such an important matter as the money that you’ll have available when you will be both no longer working, and at an old age.
Choose a Roth 401(k) account over a traditional one
It is worth noting at present, about half of all retirees are unable to keep the entirety of the Social Security money that they receive since retirement benefits are taxable.
They are subject to tax once they pass the provisional income milestone of $25,000 for a single filer, and $32,000 for a married joint filer.
Thus, you may be taxed on up to 85% of your income above those levels.
The income which is used to calculate if your retirement benefits will be taxed is called provisional income, and includes the sum of all taxable income, part of the non-taxable, and 50% of social security benefits.
Sadly, the taxation threshold doesn’t get adjusted for inflation so it stays the same.
The fact that social security benefits grow each year just like wages means that a growing number of retirees are finding themselves with federal and even state taxation on their benefits, which leaves them with reduced income.
The way to avoid this scenario is to invest in a Roth 401(k) plan since it’s not taxable and isn’t included in the calculation of provisional income.
Selecting a Roth over a traditional 401(k) account will do away with the taxes on your retirement benefits, and will leave you with higher Social Security checks.
Seek pay raises by negotiating with employer
Your Social Security benefits will depend on the average income throughout the 35 years of your career during which you will be making the highest amount of money.
So if your salary is bigger, so will be your Social Security income when you are in retirement.
The sad part is that many employees don’t stand up for themselves in order to seek higher pay that they might deserve from their employers, and thus incur a double loss of both current income while they are still in the workforce, and Social Security income further down the road after they retire.
That is why it is highly advisable that you advocate for yourself throughout your career in order to maximize the retirement checks that you will be getting in old, besides the obvious fact of getting a higher salary.
To achieve that, you should research carefully what your earnings should be, and then use solid evidence to negotiate with your employer for better pay.
You will be thanking yourself both now and later.
Find additional work to increase your taxable income
Another step to take in order to boost the taxable income that will determine the size of your Social Security benefits is finding additional work.
In fact, if you engage inside gigs and then pay Social Security taxes on the respective benefits, that could be a significant contribution to the wages considered when calculating your benefit.
Just because of that step, you might be receiving substantially larger income when you retire.
It’s essential to keep in mind that the sooner you start implementing these three measures, the bigger your Social Security checks will end up being in retirement – so you should start immediately.