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Social Security is an integral part of retirement planning for most. Maximizing your benefits can greatly impact your financial health during retirement. However, many fail to understand how to get the most out of their Social Security benefits.
Answering important questions like, should I start drawing Social Security early? Will it be there when I retire? How much will my benefit be? Is it taxable? All of these questions are important to answer before you decide when to take your benefit. Making the wrong decision can be costly.
To help you answer these questions and better secure your financial stability in retirement, we’ve compiled 15 clever strategies to maximize your Social Security benefits.
Work for 35 Years
You may be eligible for Social Security after only working ten years, and you can get benefits as early as 62 or as late as 70. However, the benefits you will get depend on the average of your 35 highest-earning years. If you haven’t worked for 35 years, the years you haven’t worked are averaged at zero.
Work Until at Least Full Retirement Age
As I said in the previous section, you can retire at 62 and collect Social Security, but your benefits will be reduced by as much as 30%. The full retirement age for anyone born after 1942 is 66, with an additional two months added for every year after 1954. If you were born in 1960 or later, the full retirement age is 67.
Increase Your Income
Social Security goes by the average monthly income of your top-earning years, so the more you earn, the more benefits you’ll receive. You can even work during your retirement to increase your benefit amount. What you earn during your retirement years does count towards your earnings record.
Avoid Social Security Tax Traps
Up to 85% of your Social Security benefit could be subject to income tax if your provisional income is between $25,000 and $34,000. For joint filers, the threshold is $32,000 to $44,000. Things like nontaxable interest, wages, IRA withdrawals, capital gains and dividends, and half of your Social Security benefits are all considered provisional income.
Monitor What You Earn
If you work after receiving Social Security benefits, monitor your earnings to ensure you don’t exceed the allowed limit. For 2024, the limits are $22,320 if you’re under full retirement age and $59,520 if you are at least full retirement age.
Save for Retirement Using a Roth Account
This won’t get you larger Social Security payments, but if you save for retirement in a Roth 401K or IRA account, you will get to keep more of your benefits. Withdrawals from these accounts are usually tax-free during retirement because you’ve already paid taxes on the money.
Be Careful of a Tax-Bracket Increase
If you work while receiving benefits, you must also be careful that your tax bracket doesn’t increase. Your earnings and Social Security are added together so that it could bump you up on the tax table.
Understand How Working Affects Your Benefits
It’s normal for people to work while receiving Social Security benefits, particularly if they claim before reaching full retirement age (FRA). However, if you claim before reaching FRA and work, your benefits may be temporarily reduced until you reach full retirement age.
Be Mindful of the Earnings Test
If you want to claim Social Security before reaching the FRA, this applies to you. The Social Security Administration has various thresholds to determine how much you can earn before your benefits are affected. You can only earn up to $1,580 a month if you are below FRA.
Consider Spousal Benefits
You may be eligible for spousal benefits if you are 62 or older and have a child in your care. This can be up to 50% of your spouse’s income. You can even claim spousal benefits if you are divorced as long as you’ve not remarried.
Look into Dependent Benefits
If you’re retired and have a dependent under age 19, you may be entitled to up to 50% of your Social Security benefits. Dependent benefits don’t decrease the amount of Social Security benefits you can receive as a parent.
Apply for Survivor Benefits
If your deceased spouse or ex-spouse was eligible for a higher Social Security payment than you are, you may qualify for that benefit. You still may be eligible, even if your spouse passed away before applying for benefits.
Check Your Social Security Statement for Mistakes
Once a year, you get a Social Security statement. Examine it for mistakes and report any errors you find to the Social Security Administration. Even a minor error can make a big difference in your benefit amount.
Suspend Your Social Security Payments
One of the easiest ways to increase your Social Security benefits is to suspend your payments. Anyone from full retirement age up to 70 can suspend their Social Security for as long as they like. Once payment resumes, they will be higher. However, stopping your Social Security could also stop spousal or child payments as well.
Undo Your Benefits
If you apply for Social Security benefits and then decide you’d rather continue working and let the benefit amount build. You can withdraw your application within 12 months of the date you first claimed. You have to repay all the money you received, but you’ll get more when your benefits start again.
41 Shocking Ways You’re Throwing Money Down the Drain
There are many ways to increase the money in your bank account. Many people start by looking at ways to make more money. And, of course, that is a great solution. But it isn’t always the easiest. A better, easier way may be to examine your spending habits. By tracking your spending and seeing where every dollar goes, you’ll likely find several instances of spending money you don’t have to. It could be little things that add up or recurring monthly expenses that are an utter waste of money.
Once you eliminate your bad spending habits, that money can go toward your emergency fund, paying off debt, or other essential things. Here are the 41 biggest wastes of money to look out for:
15 Activities Now Out of Reach Amid Economic Price Surge
In this era of profound social division and discord, one thing everyone can agree on is worsening conditions for healthy personal finance. Whether it’s the dream of homeownership, the goal of building a robust investment portfolio, or simply affording necessities like food, individuals across the spectrum struggle to overcome the decline in their financial well-being due to economic changes.
16 Things That Are So Expensive That People Now Do Without
The cost of living in the United States has skyrocketed in the last four years. So, what happens when the cost of living goes up? We stop buying certain things. I can think of many items and luxuries I’ve let go of because they’ve gotten so expensive.
Honestly, with the increasing prices, it’s not worth it. Maybe you’re experiencing the same dilemma. It’s hard to decide how to buy the things we need without breaking the bank. To help with those tough decisions, we curated these things based on luxuries and wants instead of needs.
Some may be more difficult than others to let go. However, in the end, we think it makes sense. What about you?
