I don’t care who you are or how old you may be, you have thought about Social Security from time to time. It may be because you are wondering if there will even be such a thing when you retire. Perhaps you are approaching your retirement years and are wondering exactly what you will be getting every month once you start to draw upon it. Whatever the reason that Social Security has crossed your mind, the time for thinking about it isn’t when you are turning 66 or 67. Figuring out how to maximize your Social Security benefits starts long before that.
In fact, the time to think about your Social Security benefits is always now. Here’s why. There are a dozen factors that determine what you will get as your monthly payment when the day finally arrives for you to collect. Many of those items are things you do when you are young, middle aged, and then finally retired and each of those things will affect the amount you receive. Don’t believe me? Here are 12 ways you can increase you Social Security payouts when you retire by simply following these behaviors along the way starting right now!
How to Maximize Your Social Security Benefits
1. Work for 35 Years
Your benefits are based on 35 years of your work record and if you work less than 35 years, zeros are averaged into your numbers and will reduce your benefit. If you are 21 when you begin working and work until age 67 (46 years) the top 35 years will be the ones that count. If you work until age 55 (34 years) you will have 34 years of work history and one “0” in your totals.
2. Earn More Money
Yes, the more you earn, the more your benefit will be. Improve your chances by adding a degree, taking courses, volunteering for more responsibility (and higher pay of course), getting raises and promotions. There is a maximum for the benefits but not many of us reach that level because over our lifetimes we don’t make the most of our money until closer to the end of our working career.
3. Work Until Your “Full Retirement Age” (FRA)
If you were born before 1955, that is age 66 and afterwards it gradually increases until 67. Who knows what it will be in the future as changes are being considered, but the bottom line is that if you retire before your FRA you will get less each month. On the other hand, waiting until age 70 (the latest you can begin your benefits) will increase your benefit by 8% for every year you have waited. Consider your health, your income potential, and whether you think you will live long enough to see an advantage by waiting. The break-even point for drawing when first eligible at age 62 and waiting until age 70 to maximize it is about age 78.
4. Claim Spousal Payments
If you claim based on your spouse’s Social Security benefit you can get up to 50% of it and that may be higher than your own. Check to see which is higher.
5. Claim Based on Your Former Spouse
If you are divorced, but were married at least 10 years you can claim your benefit based on you ex-spouse’s benefit (50%) if it is higher than your own and it won’t have any effect on their claim. You must be unmarried to collect this benefit.
6. Change Your Claim at FRA
You can change your spousal claim after you reach full retirement at age 70. You can possibly draw a higher benefit because of your waiting to get the maximum at that age on your own benefit.
7. Increase Based on Dependent Child
If you have a dependent child under the age of 19 (or older and disabled) you may be able to increase your benefit within certain limits.
8. Claim Disability Benefits
If you become disabled at any age you can start collecting Social Security at that time. Disabled widows can collect 71½% from ages 50-59 and 75% if caring for a child 16 and under.
9. Claim Survivor’s Benefits
If you are a widow or widower age 60, you may collect about 71½% of the benefits on your spousal account and it increases with age up to 100% if you are full retirement age.
10. Plan Your Income
If you begin collecting your benefits prior to your FRA you may be penalized if you continue to earn money. Each year the allowed amount increases, but the penalty is $1 withheld for every $2 earned.
11. Plan Your Tax Burden
If your adjusted gross income is above a certain level, your Social Security may be federally taxed (up to 85% of it). The threshold for taxation changes every year. In some states, Social Security benefits are subject to income taxes as well.
12. Check Your Earnings Record
Check your earnings statement annually online at the Social Security Administration to make sure your records are accurate and your benefits are calculated properly.
The Social Security program represents a big part of your retirement plan and it’s up to you to maximize all of the details and do what you can to make sure it works to your advantage. Everyone has different requirements and “now” is always the best time to make sure you understand what you need to do to make it work best for you.
Do you understand your Social Security program and are you planning for maximization of your own personal needs? When was the last time you checked your earnings record online to insure its accuracy?