Social security came into existence in 1935 as a financial safety net program for individuals who couldn’t save enough money for retirement. Fast forward to 2023, the program has evolved to become a primary retirement income for up to 55% of seniors living in the country, helping many to afford basic-level financial stability.
Even better, individuals can now take prepense measures, known as social security strategies, to increase their overall social security life claim. These strategies include deliberate approaches taken over time to ensure you’re getting more from social security in the long haul. Here is an in-depth guide highlighting 15 tips on how to maximize social security benefits. Keep reading to learn more.
Social Security Basics
Social Security is a federal program legislated to cushion retirees or other vulnerable Americans with a stable and reliable income.
According to the Center on Budget and Policy Priorities, social security income is of vital importance, given that over 22 million people, including 1 million children, would be living in abject poverty without it.
There are various types of benefits under social security, including:
- Retirement benefits: individuals can start claiming retirement benefits if they accumulate 40 social security credits or attain the full retirement age, which ranges between 65 and 67 years.
- Disability benefits: individuals with a severe physical or mental impairment that is expected to last over a year or result in death are eligible for social security payments, especially if they attained enough credits through previous work.
- Spousal benefits: spousal of eligible workers who are at least 62 years of age and have been in the marriage union for at least a year are also allowed to collect social security benefits after attaining a certain eligibility criterion.
- Survivor benefits: this includes monthly payments made to the surviving dependents, spouse, or children of a deceased worker who has attained enough credits. The eligibility requirement for this program includes a close relationship with the deceased and fulfillment of certain dependency criteria.
It’s worth noting that these are just general provisions of the social security benefits. The Social Security Administration (SSA) assesses a range of other factors to determine a person’s eligibility or benefits amount, including state-specific regulations and individual circumstances.
That said, engage a reputable social security planning consultant to get personalized information based on your unique situation.
Get professional help of a Social Security advisor today! Unlock your Social Security potential today! Discover smart strategies and maximize your benefits with our Social Security Planning services. Don’t leave money on the table – take control of your retirement income.
Social Security Strategies
Social security is here to stay, at least for a decade, after which subsequent payroll deductions will be enough to offset up to 77% of the scheduled benefits. Although there is a looming potential crisis in the program, here is how to maximize your social security benefits while it lasts:
Delay taking benefits
One of the reasons for filing for SS and claiming the benefit earlier is simply because you need it to buy basic food supplies and keep the lights on. However, it’s important to understand that delaying the benefits by working longer in your 60s will leave you in a better position than living on a reduced benefit in your 80s. To put it into better perspective, this strategy guarantees you an 8% extra payment from social security until the benefit maxes out at 70 years.
Maximize your earnings
Another way to boost monthly payments in social security benefits is by maximizing your earnings over time as much as you can. Typically, this means earning at least $160,200, which is the 2023 maximum earning for the 6.2% social security income tax. Maxing out for a period of at least 35 years makes you eligible for the maximum benefit amount of $3,627 per month.
Consider spousal benefits
Social security spousal benefits strategies have evolved in the recent past, and higher earners can no longer “file and suspend” to optimize their overall payment. However, low-earning spouses can gain more by taking a spousal benefit instead of their own retirement benefits. Even better, individuals born before January 2, 1954, can file a restricted application for spousal benefits only before claiming their own retirement benefit at later stages.
Take advantage of survivor benefits
Engage an experienced estate financial planning advisor in the unfortunate event of your spouse’s demise to assess whether you’re eligible to claim their social security benefits. This can be a source of additional income, especially if your spouse has a higher income and earned more security credits than you.
Be aware of income limits
Social security benefits are subject to various income limits, including $25,000 for single individuals and $32,000 for married beneficiaries. Have a grasp of these limits and talk to an expert to understand the ramifications they’ll have on your overall benefit payout in the long haul.
Review your earnings history
Another way of optimizing social security payouts is by reviewing your earnings history periodically to ensure that they are accurate and consistent. In other words, you should request a social security statement every month and raise any concerns with the SSA. This is important because social security payment errors can result in lower benefits in subsequent months.
Plan for taxes
While it is general knowledge that social security benefits are funded by tax payrolls, many Americans don’t understand that their monthly payouts can be subject to federal income tax. Unfortunately, if you plan to work during retirement, an income of over $25,000 for single individuals and $32,000 for married individuals can trigger taxation. That said, it will help if you seek professional tax planning advice on how to go about this and maximize your gains.
Understand how working affects benefits
It’s common to find people continuing with work while receiving their benefits, especially if they started claiming before reaching the full retirement age (FRA). However, it’s important to note that this approach may temporarily reduce your benefits until you reach the FRA, where the annual or monthly earnings will no longer affect benefit payouts.
Be aware of the earnings test
The earning test applies to anyone who wants to start claiming their social security bonus before attaining the full retirement age. The SSA has established various thresholds under this eligibility criterion to determine how much an individual can earn while working without affecting their monthly payout amounts. For instance, those who are below the full retirement age can earn up to $1,580 per month without impacting their benefits under the earnings test.
Factor in inflation
Like any federal program, social security benefits are reviewed annually under cost-of-living adjustments (COLAS) to cater to inflation. Since inflation rates are dynamic and depend on a range of several other factors, you can seek help in financial planning for business owners to understand the impact of inflation on the purchasing power of your monthly payouts.
The 80/20 Rule of Thumb for Retirement
Consider disability benefits
You can be eligible for an extra social security payment under the disability program, especially if the physical or mental impairment hinders you from working. However, you must meet certain criteria to leverage social security disability secrets tips, including:
- Having a severe medical condition that can last for at least a year or result in death
- Being unable to perform a substantial gainful activity (SGA), whose earning limits are $2,380 for blind applicants, and $1,380 for non-blind applicants
- Possessing enough work credits, depending on the age and time of disability
Be aware of divorce benefits
Another social security trick that many don’t know is that divorced individuals who stay in their previous marriages for at least ten years can qualify for spousal benefits based on their ex’s work record. You can qualify for up to 50% of the spousal’s benefit at their full retirement age, provided you are at least 62 years old. However, it’s important to note that the divorced monthly payouts are likely to cease once you remarry.
Take advantage of retirement calculators
Leverage online retirement calculators to estimate the opportune time to start claiming your social security bonus check and understand the impact of that timeframe on your overall retirement income. For starters, you can use the free Social Security Quick Calculator to estimate earnings or more sophisticated paid options by Bankrate or Nerd Wallet for a more in-depth analysis.
Don’t overlook Medicare
It’s important not to overlook Medicare while devising strategies to get extra money for social security. For instance, pay attention to the initial enrollment period, which begins three months prior to your 65th birthday and elapses three months after, to avoid unnecessary penalties or coverage delays. You might also want to enroll in the right coverage alongside Medicare Supplement Insurance (Medigap) to cover additional expenses that can’t be met by your SS monthly payout.
Understand the impact of early retirement
Lastly, understanding the impact of early retirement is one of the most overlooked social security claiming strategies when planning for the future. While unique circumstances might push you to start claiming your benefits before attaining the full retirement age, this action will permanently reduce your monthly benefit amount. With that in mind, engage professional retirement planning services to get a better understanding of the long-term impact of this reduction over your anticipated income.
The Social Security Administration is set to remit over one trillion dollars in monthly payments to nearly 67 million Americans in 2023 alone.
Employ these SS tips for life planning to optimize the amount you’ll get in the long haul and secure a stable financial and income retirement experience.
Experts from Interactive Wealth Advisors are here to help you get the most out of the program—don’t hesitate to contact us whenever you need help.