Maximizing your SS (Social Security) benefits is one way to increase your retirement paycheck. Unlike investment, annuity, or retirement portfolios, Social Security is the only retirement income guaranteed for life and backed by the credit of the United States government.
There are a few simple strategies you can use to increase your Social Security benefits. Instead of settling for reduced lifetime payments, check out these methods to get the most of your benefits.
Delay in claiming for social security benefits
The easiest way to increase your monthly payments is to delay claiming for Social Security benefits. The SSA (Social Security Agency) allows all Americans to start collecting benefits at age 62, but it can lower your monthly payments.
If you choose to start collecting Social Security earlier, you lose about half of the total amount you would have earned if you had waited.
If you start early, you could lose up to 30% of the monthly payment you would be entitled to at full retirement age. If you received a monthly benefit of $1,500 at age 67 for full retirement, for example, starting benefits before age 62 would reduce that amount to $1,050.
While waiting for social security benefits to start until you reach full retirement age, you can increase your monthly benefit. An 8% yearly increase in benefits payable for each planned year from full retirement age to age 70.
This means that the $1,500 benefit at age 67 can increase by 24% to $1,860 per month if you wait until age 70; this is the age at which you should start making payments. Don't wait until after 70 to start making payments.
Work for at least 35 years.
The social security administration uses the highest income of the last 35 years to calculate the principal insurance amount (PIA), which is the amount of the monthly benefit that you receive from the total age of the pension retirement. If you worked under 35 years, Social Security uses zeros to calculate years with no income.
This means that beneficiaries with incomes below 35 can make a big difference in the benefit amount by continuing to work and replacing some of the zeros with positive incomes.
It is suggested that you strategically increase annual income, if possible, to maximize future profits.
The first income of $142,800 is subject to social security contributions and is also used to calculate future benefits. If you earn less than that, consider a second job or a race to increase your system dues, and you will set yourself up for a bigger benefit in the future.
Collect spousal benefits
Based on the spousal's employment history, receiving benefits for your spouse is another way to increase social security benefits. You are entitled to spousal benefits in one of two ways: either you do not have a sufficient employment history to claim social security benefits yourself, or your spouse's benefit would be higher than that which you are entitled to.
To apply for benefits using any of these methods, you must be at least 62 years of age or have a qualifying dependent child, under 16, or a child receiving Social Security disability benefits.
You can receive up to 50% of your spouse's PIA. However, receiving the spouse's benefit before the full retirement age means reducing the monthly payment. And, unlike your spouse's benefits, there will be no increase in your spouse's earnings if you stay below full retirement age.
You may qualify for a spousal benefit even if you are divorced. As long as the marriage lasted at least ten years and the ex-spouse who claimed marital benefits never remarried, the same benefits will be available to divorced beneficiaries aged 62 or older. If the ex-spouse applies to the working spouse, s/he must have been divorced for at least two consecutive years.
Apply for social security survivor benefits
You can also increase your monthly retirement salary by using social security survivor benefits.
If you're a widower and your deceased spouse's pension is greater than your retirement pension, you can usually claim the greater of the two.
Experts recommend that spouses with higher incomes wait as long as possible to apply for benefits. This can prepare a spouse with lower incomes for a higher benefit, such as a widow or widower. The difference between spousal benefits, which is based on the adjusted PIA, and when the inactive spouse chooses to start with the benefits, the survivor benefits are determined by the amount the earning spouse received after the start of the benefits.
When a couple receives benefits and one spouse dies, the surviving spouse usually receives the higher of the two future benefit payments, but not both. This means that you have to take into account the difference in age, life expectancy, state of health of each spouse, and the amounts of benefits available to each spouse to try and maximize your benefits, both during your lifetime and when one of you is widowed.
Avoid social security tax.
Social Security may be subject to federal income tax. The amount that goes to Uncle Sam depends on a pretty complicated formula.
The Social Security Administration analyzes combined income, also known as middle income, to determine the taxable percentage of your benefits. This is your AGI (adjusted gross income) or your income minus any deductions you're entitled to plus non-taxable interest, such as what you earn from municipal bonds or income-generating assets from your Roth accounts and half of your Social Security income.
Unfortunately, you may have to pay taxes on your benefits. The only way to circumvent paying federal income tax on Social Security benefits is to have a combined income of less than $25,000 (for individual taxpayers). Between $25,000 - $34,000, half of your Social Security is subject to federal income tax, and above $34,000, up to 85% of your Social Security income is taxable.
Always plan as if you owed up to 85% of your Social Security benefits.
You can alleviate these taxes with strategic withdrawals from your non-social security retirement income. Funds withdrawn from a Roth retirement account are exempt from income tax and are therefore not included in the combined income calculation. Strategic reduction of your assets from traditional taxable retirement accounts and Roth accounts can help you reduce your combined income and the amount you have to pay for Social Security contributions without forcing you to live on less.
Resolve an initial error in Social Security Mistake
You can also increase your social security contributions by correcting any previous errors. If you think you received benefits too early and want to wait, you can suspend your payments and increase your benefits. There are two main ways to approach initial benefits early on.
Use a Do-Over
If you find that you received them in advance within 12 months of the start of benefits, you can cancel your request. You will have to return any funds you received during that time, but you can start over without penalty later.
This means that you can cancel your early filing and benefit from qualifying increases up to the age of 70. If you have enough retirement money to live with ease without the Social Security benefits you've already received, this can be a good way to increase your future benefits.
Suspension of benefits
If it takes more than a year to realize that you received your benefits too early, you can always increase your future payments by suspending your benefits. However, this option will only be available after reaching full retirement age. If you willingly suspend your benefit, you agree to cease receiving payments and acknowledge that all other benefits payable from your records, such as benefits for your spouse, will also be suspended. (However, divorced spouses can continue to pay during this period.)
By suspending benefits, you can start earning deferred retirement credits or the 8% annual increase you receive every 12 months if you delay benefits between full retirement age and age 70. You could get these loans even if you received the benefit before you reached full retirement age.
If you voluntarily suspend your benefits, the SSA automatically restores them when you turn 70 if you have not already done so.
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