Maximizing Social Security benefits takes a lot of strategy because, for most citizens, the program is core to creating post-retirement income. Understanding the rules, using the options at hand, can help you increase your benefits and achieve additional financial security in retirement. Here are key strategies to consider for maximizing Social Security benefits.
1. Know the Basics
Your Social Security benefits are based on your lifetime earnings history. Exactly how that works is a key to maximizing your benefits. How much you receive is based on your lifetime earnings, the age at which you start receiving your benefits, and whether you continue to work while receiving benefits from Social Security.
2. Delay Claiming Benefits
The best way to maximize Social Security benefits is by waiting until full retirement age or longer to begin claiming. For anyone born in 1943 or later, their FRA ranges between the ages of 66 to 67 years old. Delayed benefits beyond your FRA increase your monthly benefit amount by about 8% per year until age 70. This can add up to quite an increase in benefits over time, especially if you live longer than average.
3. Consider the Impact of Early Claiming
Claiming early Social Security benefits before reaching your FRA will decrease your monthly benefit amount. Benefits begun at age 62-the earliest date at which one can start receiving benefits-are cut by as much as 30% from your FRA amount. In practice, some may have no other choice but to adopt an early claim due to necessity or health status, although in general, one may want to encourage delaying if one has the financial wherewithal to do so, since the monthly cut can really add up over time.
4. Optimize Spousal Benefits
Optimization of spousal benefits can result in significant additions to overall Social Security income for married couples. One strategy involves the fact that one spouse waits until age 70 for benefits, while another spouse starts drawing his or her benefit at FRA or later. In this case, the benefit of the delaying spouse would increase, and the lower-earning spouse may be eligible for spousal benefits based on the record of the higher earner. The process would maximize the combined benefits of the couple.
5. Coordinate Benefits with Your Working Status
Since you are working while collecting Social Security benefits before your FRA, you’re going to be subject to the earnings test. For 2024, you get dinged $1 in benefits for every $2 earned above the $21,240 threshold. Once you reach FRA, these limits do not apply anymore, and your benefits get recalculated based on any months benefits were withheld due to excess earnings.
6. Check Your Earnings Record
Social Security benefits are based on your lifetime earnings, so you will want to verify your earnings record is correct. You can find this information through your online account-you’ll need to review a copy of your Social Security Statement. Look to see whether any errors have occurred in reporting your earnings. In erroneously reported earnings may trigger reduced benefits. Contact the SSA immediately if you discover that a mistake has been made.
7. Understand the Survivor Benefit
If you’re married, you want to know how survivor benefits work. When a spouse dies, a surviving spouse can claim the higher of their benefit or the deceased spouse’s benefit. By strategically timing when each spouse takes the benefits, you can guarantee that the survivor benefit is maximized to give the surviving spouse the greatest financial security.
8. Take Advantage of Social Security Planning Tools
Use online calculators and other tools to estimate your benefits and try different claiming strategies. The SSA has a number of tools on its website, but more advanced calculators can be found from various private financial planning services that model different scenarios using your circumstances.
Conclusion
The key to maximizing Social Security benefits is timing, strategy, and a little knowledge in the way the system works. You can maximize your total Social Security income by delaying benefits past your full retirement age, optimizing spousal benefits, coordinating the benefits with your working status, and making sure that your earnings record is accurate. Make your decision based on your individual financial situation, long-term goals, and health, and use available tools and resources to make informed choices that align with your retirement plans.
