Five Ways to Make Sure You Get the Most Social Security Income at Retirement – And What You Can Do About It Now

It’s hard to believe that Social Security has been in existence for over 75 years. During that time, however, it has become an income staple for many Americans, with nine out of ten people over 65 receiving benefits. Although Social Security provides benefits for other than just retirement income, those over age 65 depend on Social Security for roughly 40 percent of their income. And, nearly 14 percent of Americans aged 65 and over depend on Social Security for 100 percent of their family income.

The average monthly Social Security check for a retired worker is $1,170. Yet, the need for Social Security benefits increases with age. And, with a trend towards longer life expectancies, it makes sense to try and maximize the benefits you will receive from the program. Particularly, if other retirement sources like 401K, IRAs and Real Estate are returning far less than expected.

Make Sure That You Qualify

The first step towards maximizing your Social Security benefits – or even receiving any benefits at all – is to make sure that you qualify. By working and paying Social Security taxes, you earn credits towards your Social Security benefits. If you were born in 1929 or after, you will need 40 credits, or ten years of work, in order to qualify.

If you stop working prior to earning 40 credits, you will not be eligible for Social Security retirement benefits. However, the number of credits you’ve built up will stay on your record. Therefore, if you return to work at a later time, you can continue to add more credits to your total. You should receive your official security statement every year, which clearly spells out your social security credits and provides an estimate of your SSI payment at retirement.

Since your Social Security retirement benefit payments are based on how much you earned while you worked, higher lifetime earnings will result in a higher amount of Social Security benefits during retirement.

Wait To Collect Benefits

Another important factor in the amount of benefits you receive has to do with when you begin receiving them. Workers may begin taking Social Security benefits as early as age 62. However, if you begin receiving benefits at age 62, your monthly benefit amount will be permanently reduced.

If, however, you wait to receive your benefits, your monthly amount will increase. In fact, between age 62 and 70, you will increase your benefit amount between 7 and 8 percent for each year that you wait – up to a maximum of 32 percent at age 70. This is depicted in the SSA chart below:

Avoid Long Gaps in Employment

Your Social Security retirement benefit amount is calculated based on an average of indexed monthly earnings. Up to 35 years of earnings can be used to compute your average. Therefore, if you have several years with no income at all, your earnings amount for those years is averaged in as $0. This can significantly bring your overall average earnings down, which means that it is better to earn a partial or lower income, rather than no income at all.

Take a Double Dip

If you are married, you may be able to draw your regular benefit and your spousal benefit at different times, resulting in potentially higher benefits in the future. When you reach your full retirement age, you may choose to either receive your own Social Security benefit amount or your spousal benefit. With this strategy, choose to receive the spousal benefit, even though it is a lower amount. By doing so, your own Social Security benefit amount will continue to grow (as described in the prior point) and last longer.

Watch Out for Taxes

If you are still working while you receive Social Security retirement benefits, be careful how much you earn. This is because if you earn above a minimum threshold amount, you will incur taxes on your benefits that could result in a partial or even a complete loss of your benefit amount. Those who have income above a certain level can have a part of their monthly Social Security income included as taxable income on their tax return. $1 from your benefits for each $3 you earn above $37,680 is taxable until the month you reach full retirement age (70).

Therefore, careful tax planning is a must if you plan to work – even part time – during your retirement years.

The SSA reports that By 2035, there will be almost twice as many older Americans as today and a ratio of  only 2.1 workers (vs 2.9 today) to each Social Security beneficiary. So it is essential you plan now to maximize your social security benefits in your golden years.

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