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How To Get The Maximum Social Security Benefits
by Chris Malone,posted Jan 31 2013 5:54AM
One day closer to the weekend. Now I know, for me, I don't think Social Security will be around when it time to claim. I'm OK with that. It's simple math that there will not be enough people working when I retire to support the system. But if you are looking at retirement in the next few years, take a look at these tips on how to maximize your SS benefits.
1. Work At Least 35 Years
Social Security benefits are calculated based on your 35 highest-earning working years. If you work fewer years, you’ll have years with zero income averaged in — which will lower your payout.
2. Ask For A Raise
If you experience a jump in salary, you’ll likely boost your future earning potential and may see an increase in your Social Security payments down the road — since as we just explained, Social Security takes into account the 35 top-earning years of your career.
3. Take A Second Job
The same logic applies: If you earn more each year, you’ll likely increase the amount you get in Social Security when you retire.
4. Wait Until Full Retirement Age To Claim Social Security
You can begin collecting Social Security benefits as early as age 62, but you might not want to: Your benefit will be reduced by 25% for life. To get your full payment, wait until you reach full retirement age — currently 66 for anyone born between 1943 and 1954. For those born between 1955 and 1959, the age gradually rises toward 67. For those born in 1960, it’s 67.
5. Better Yet: Wait Until Age 70
If you can afford to wait until age 70 to claim Social Security benefits, it’ll pay off. Thanks to what the Social Security Administration calls “delayed retirement credits,” benefits increase 8% each year you delay tapping into Social Security — up till age 70. So waiting until you reach 70 means about a third more income for life.
When considering this strategy, it’s particularly beneficial for the higher-earning spouse in a marriage to hold out until age 70 to increase the total benefits the couple will get throughout their lifetime. In the event the spouse with the higher benefit passes away, the surviving spouse will get the higher payment.
If you took benefits early and regret the move, it might not be too late to fix it. You may be able to repay all the benefits you got so far and restart them at a higher level based on your age. But this policy isn’t as flexible as it used to be: For more details, check out this page on the SSA site.
6. Use Online Tools
If you’re unsure about the best time to claim benefits based on your individual budget, health, life expectancy or other factors, use online resources to help you decide. A good place to start is SocialSecurity.gov/MyStatement, where you’ll get your personalized statement. This estimates what your benefits will be at age 62, at full retirement age or at age 70.
Once you get estimates for you and, if applicable, your spouse, there are other online tools that compare your benefits under various scenarios to help you determine the best claiming strategy. Consider AARP’s Social Security Benefits Calculator or Analyze Now’s Strategic Social Security Planner.
7. Claim Spousal Benefits
If you’re married, you have a choice: You can either take the benefit based on your work history, or half your spouse’s benefit. So if your spouse earned a lot more than you did and has a higher benefit as a result, compare and see which will pay the most. You can also claim Social Security benefits based on an ex-spouse’s work record if you were married for at least 10 years. Doing so doesn’t reduce their check or otherwise affect them. In fact, they’ll never know you applied.
8. Taking Early Retirement? Beware Of Outside Income
If you start taking benefits before reaching your full retirement age, employment elsewhere can reduce your Social Security checks. For example, say you started taking Social Security in 2012 at age 62 and your full retirement age is 66. For 2012, your benefit would be reduced by $1 for every $2 you earned in gross wages or net self-employment income above $14,640.
If 2012 was the year you reached full retirement age, you could have earned up to $38,880 before the month you turned 66. More than that and your benefit would be reduced by $1 for every $3 you earned.
After you reach full retirement age, you get your full benefit no matter how much you earn.
9. Claim Twice
A dual-income retired couple may be able to claim spousal benefits, then later switch to payments based on their own work record. This could make sense if waiting until a later age would result in higher benefits.
For example, say the husband is 66 and the wife is 62. If the husband files for benefits, the wife could opt for half her husband’s benefit, while still earning money and letting her benefit grow. When she turns 70, she could drop the spousal benefit and file for benefits based on her own work record.
There are lots of strategies such as this to maximize Social Security. As you approach retirement age, be sure to do lots of reading. This article from Kiplinger is a good example.
10. Benefits For Your Kids
When you start collecting Social Security benefits, unmarried dependent children under age 18 may qualify to get benefits worth up to half of your full retirement benefit amount. This can include a biological child, adopted child, stepchild or dependent grandchild. They may also get benefits if they’re 18-19 years old and a full-time student (no higher than grade 12) or 18 or older with a disability that began before age 22.
11. Plan ahead for taxes
If the sum of your adjusted gross income, nontaxable interest and half your 2012 Social Security benefits exceeds $34,000 ($44,000 for couples), up to 85% of your benefits may be taxable. You can minimize this expense by using certain tax-saving moves such as investing in annuities that allow you to earn interest that isn’t taxed until you withdraw it.
12. Do your due diligence
Always read your Social Security statements (either received as paper statements in the mail or online at SocialSecurity.gov/MyStatement) to be sure everything has been reported correctly. Although inaccuracies are uncommon, some scenarios lend themselves to a greater chance of error — such as a name change your employer failed to update on company records.
13. Clear your debts
Your Social Security benefits are protected from most debt collections, but they can be taken to collect unpaid federal taxes, federal student loan balances and child support or alimony. Clearing these debts will leave your Social Security benefits untouched.