Social Security. We all contribute to that safety net, hoping it will be there when we need it most. Know-how is indispensable when maximizing your Social Security benefits, whether you’re a few years away from retirement or thinking about your golden years.
But let’s face it. Social Security can be a bit confusing. Thankfully, I’m here to help you understand this valuable program.
The Basics of Social Security: A Quick Refresher
Before we dive into the strategies, let’s take a quick look at how Social Security works.- Your earnings record. A person’s benefits are determined by his or her 35 highest-earning years. You may not receive a payout if you haven’t worked for 35 years, as zeros are included in the calculation.
- Full Retirement Age (FRA). At this age, you receive 100 percent of your calculated benefits. In most cases, FRA is 67 for people born after 1960.
- Claiming your benefits. You can start taking benefits as early as 62, but your payments will be permanently reduced. Conversely, delaying benefits beyond your FRA increases your payments.
Strategies to Boost Your Social Security Payout
With that out of the way, let’s get to the good stuff. The following are ten actionable strategies to maximize your Social Security benefits.1. Work That 35-Year Grind (But Strategically)
Social Security benefits are only available to workers who have worked at least 10 years. However, your benefit amount is determined by your 35 highest-earning years. Unless you have worked for 35 years, those years are counted as zero, significantly reducing your payouts.Think of it this way. Based on your average monthly earnings over those 35 years, Social Security calculates your retirement benefits. When you have gaps in your work history, those zeros will drag down your average.
Keep in mind, however, that there are limits. At age 62, the maximum benefit will be $2,831. But at age 67, the maximum benefits will be $4,043 ($3,911 in 2024), and at age 70, the maximum benefits will be $5,108 ($4,873 in 2024).
2. Time Your Retirement Wisely: Wait Until Your Full Retirement Age
Taking Social Security at age 62 is possible, but you’ll get significantly reduced benefits—up to 30 percent. Depending on your birth year, your FRA varies. People born in 1960 or later typically reach their 67th birthday.If possible, it’s best to wait until your FRA. As a result, you’ll receive your full retirement benefit, which is significantly higher than what you would receive at 62.
Even better? Wait beyond your FRA. Delaying claiming benefits beyond your FRA increases your payments. Known as a “delayed retirement credit,” this can significantly boost your overall payout.
3. Get the Most out of Your Earnings
Social Security taxes your income, and those contributions directly affect your future benefits. The higher your potential payout, the more you’ll earn (up to the annual maximum).
But here’s the catch. Every year, Social Security taxes are capped at a certain amount. Each year, this limit is increased.
Your employer will pay another 6.2 percent, up to a combined income of $168,600 in 2024 and $176,100 in 2025. Generally speaking, you would get the largest Social Security payout by paying the maximum taxes. In other words, you are topping up your contributions by paying taxes on the maximum, which tends to increase annually.
There is hope if you haven’t yet reached your maximum taxable earnings.
- Continue working after retirement. Your earnings record can even be boosted by a part-time job, which increases your benefits.
- Consider a higher-paying role. Consider career advancements or exploring new opportunities to increase your income.
4. Leverage Spousal Benefits (If Applicable)
You may be able to increase your retirement income if you are married, thanks to spousal benefits.- For those born before January 2, 1954. Depending on your spouse’s earnings record, you might be able to file a “restricted application.” You might be able to take advantage of this strategy if your spouse has a higher earning record.
- For those born after January 2, 1954. It is possible to claim both your own and your spouse’s benefits. Regardless of which amount is higher, you’ll receive it.
5. Don’t Forget About Your Little Ones (If You Have Them)
You might be able to get Social Security benefits for your kids under 18 (or 19 if they’re still in high school). Obviously, this can significantly boost your family’s income.- Who qualifies? A biological, adopted, or stepchild who is under 18 years old. Additionally, children in high school (up to 19 years of age) and children with severe disabilities are included in this category.
- How much can they receive? You can receive half of your full retirement benefit, subject to some annual limits.
- Spouses can also benefit. You may qualify for additional benefits if caring for a child under 16.
6. Survivor Benefits: A Safety Net for Your Loved Ones
In the event of the death of your spouse, you may be entitled to survivor benefits. As a result, you could receive their Social Security payments, which can be a lifeline during difficult times.- How it works. Whenever your spouse’s benefit is higher than yours, you’ll receive their higher amount. Suppose your husband receives $2,100 monthly, and you receive $1,300. In this case, you would receive $2,100 monthly as a survivor.
- A strategic approach. It might make sense to claim your spouse’s survivor benefits while delaying your own to maximize your retirement income.
7. Keep an Eye on Your Earnings Record
It’s important to keep track of your earnings history. Specifically, you should regularly review your statement to ensure your earnings are accurately reported. After all, discrepancies can affect your benefits in the future.Through your My Social Security account, you can view your Social Security Statement.
8. Be Aware of Tax Bracket Creep
If you continue to work while receiving Social Security, your combined income (from work and Social Security) could place you in a higher tax bracket.9. Consider a Roth Conversion (If Appropriate)
When you turn 73, you must take Required Minimum Distributions (RMDs) from 401(k)s and IRAs. Income from these distributions is taxable as ordinary income.A Roth IRA, on the other hand, lets you withdraw your money tax-free when you retire. If you convert some of your traditional retirement savings to a Roth IRA, you can minimize your tax burden in retirement. You will, however, pay income tax upfront on the amount you convert.
10. Consult With a Professional
The rules of Social Security can be complex. An advisor or a Social Security specialist can help you understand your retirement income options and make informed decisions.Understanding these strategies and taking proactive steps can ensure a more comfortable retirement.
Tools and Resources
- Social Security Administration (SSA) Calculator. Get an estimate of your benefits using an official tool from the Social Security Administration.
- Financial advisors. An experienced financial planner can provide you with strategies tailored to your particular situation.
- Online retirement calculators. Find out how your claiming decisions may affect your income with free and paid tools.
Conclusion
Careful planning and consideration are the best ways to maximize your Social Security benefits. If you understand the rules and implement the abovementioned strategies, you can ensure a more secure financial future for yourself and your family.By John Rampton
The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
