Tens of millions of American taxpayers each year will put in a claim for their Social Security benefits after contributing payroll taxes throughout their working years.
The Social Security Administration (SSA) reported approximately 67 million residents (1 in 5 people) were collecting SSA retirement benefits at the end of 2023. Additionally, the federal agency reported older Americans make up 4 in 5 beneficiaries.
Applying for these and maximizing Social Security benefits isn’t as straightforward as you might think. To maximize SSA benefits, you’ll want to proactively plan for the age you hope to retire and, when you plan to begin claiming, pair this with other retirement strategies.
This article aims to provide insight on how you can maximize your Social Security benefits by exploring various strategies, to empower you to make informed decisions for a more secure retirement.
When Should You Start Your Social Security – Age 62, 65, 70?
The year you should start taking Social Security benefits ultimately depends upon your specific circumstances. The general rule of thumb is that the longer you can delay your benefits, the higher benefit you’ll collect.
If you apply to claim Social Security benefits before age 62, you will pay an early withdrawal penalty. While you can collect at age 62, this might not be advantageous, especially if you’re still working or have enough retirement funds where you don’t need to rely upon them. On the other hand, if you become disabled or need extra funds to support yourself, claiming SSA benefits at age 62 or 65 might be to your advantage.
Or, depending upon your circumstances, waiting until your full retirement age (age 67 or older) could help you in maximizing Social Security benefits. The bottom line is, the longer you leave your money in the Social Security System, the more you’ll be able to receive in your monthly payments down the road.
Determining how to best plan for Social Security benefits is complex. A financial expert can help guide you. Use Our Free Advisor Match Tool
Strategies for Maximizing Your Social Security Benefits
The following are potential strategies you can leverage to maximize your Social Security benefits.
1. Delay Claiming Benefits – up to 8% per year
If you’re financially set with retirement funds or are still working, you can plan to wait until you reach full retirement age (FRA) to begin claiming benefits.
- Collecting SSA benefits at age 62 will reduce your amount by 25% to 30%
- If you were born after 1942, your FRA is 66 (two months are added for each year up after 1954)
- If you were born in 1960 or later, your FRA is age 67
If you wait to collect until your FRA, you can receive up to an additional 8% per year. This is significant! The formula is more complex because even every month you delay gives you an increase (8% annual rate/12 months).
However, it’s important to understand that waiting until after age 70 doesn’t offer any financial benefits. You don’t want to delay any more than age 70. To maximize, if your FRA is 67 and, if you wait until age 70 to claim, you’ll get 124% of your full benefit, along with any cost of living adjustments (COLA) added in during that timeframe.
2. Work for At Least 35 Years
Eligibility to collect SSA benefits occurs once you reach 10 years of employment, but you’ll get more money if you work at least 35 years. Your Social Security check amount is calculated by taking the average of your 35 highest-earning years.
If you don’t work for some years, the Social Security Administration will factor those years in as zeros. By working more years, you can substantially raise your retirement monthly benefit by over $2,000 per month in 2024.
3. Work While Taking Social Security
In certain circumstances, working while collecting Social Security can help maximize retirement benefits. It’s a good idea to speak with a professional financial advisor to ensure you aren’t hurting your overall retirement plan should you decide to keep working while collecting Social Security payments.
- If you have years of lower or no earnings, your current earnings can count as a part of your 35 years and boost your monthly payment
- Once you reach your FRA, any money you earn will not decrease your SSA benefits
- Since your highest earning years are counted, if you continue working at a higher rate of pay, this can increase your benefit.
It’s important to understand if you earn too much and are under your FRA, your monthly payment will be reduced, depending on how much you earn. In 2024, the limit is $22,320. Make sure you don’t exceed this amount or else it’ll reduce your monthly benefit.
4. Wait for Spousal Benefits Until Full-Retirement Age
The Social Security Administration will reduce benefits if you and/or your spouse begin collecting before reaching full retirement age. In the event your spouse takes early Social Security (and less amount of benefits) and passes away first, you’ll also receive less. This is a case where waiting until FRA is beneficial.
5. Plan for Your Spouse’s Survivor Benefits
If you are married, care for a child, earned little in salary, and are at least age 62, you might be eligible to receive federal retirement benefits through your spouse. This is contingent upon when your spouse retires, but the amount of the spousal benefit can be as much as 50%.
6. Opportunities for Divorced Spousal Benefits
If your ex-spouse’s eligibility for SSA benefits exceeds your own benefit, you may also be eligible to put in a claim based on your Social Security earnings. Important to keep in mind, that if you remarry, you cannot claim your ex-spouse’s benefits.
Social Security Disability Eligibility and Benefits
Some individuals may qualify for Social Security Disability if they become fully disabled. Generally speaking, 40 credits are needed, with 20 of those credits being earned in the prior 10 years ending with the year your disability began.
This is reserved for people who have a qualifying disability, cannot perform previous work because of a medical condition, or the condition has lasted or is expected to last for at least one year or is considered to be terminal. Individuals should consider speaking to financial advisors because there is usually an income limit involved.
How to Calculate Retirement Benefits
Calculating your Social Security benefit is a complex process and involves many factors. In the most basic calculation, the SSA takes your lifetime earnings, how many years you’ve worked, your age, and an adjustment for inflation. The federal agency also offers a calculator to give you an idea.
Working with a professional can help guide you in calculating and maximizing your Social Security benefits. Get Matched With a Financial Advisor
Additional Strategies for Maximizing Benefits
Along with the above strategies to maximize your Social Security benefit, you can consider these additional approaches to help boost your monthly retirement income.
1. Thoroughly Check Your Earnings Record
Every year, the Social Security Administration sends you a statement. Never assume this document is accurate. Be sure to double-check if the amounts the federal agency lists are correct. If you find discrepancies, report them to the SSA. Even one or two minor miscalculations could significantly impact your future retirement benefit amount.
2. Plan for Taxes on Social Security Benefits
Your age won’t impact whether your SSA benefit is taxed, but your income will. It’s important to be aware of inadvertently pushing yourself into a higher tax bracket while collecting your Social Security benefit.
- Single retirees with $25,000 or less income will not have to pay taxes on benefits
- Married couples filing jointly making under $32,000 earned income won’t have taxable income on their SSA check
- Higher income levels will exceed the earnings limit and will be taxed on SSA retirement benefits ranging from 50% to 85%, depending upon income level
- Consider if your income is high enough to be worth paying extra taxes
For many people, delaying collecting until their full retirement age or age 70 means they’ll no longer be working and will be in a lower tax bracket.
3. Voluntary Suspension of Benefits
Even if you’ve begun collecting, you can voluntarily suspend your benefits per SSA policy. How this works is:
- You must have collected for less than one full year
- Put a halt on your benefits
- Pay back any money you’ve already claimed
- Get the 8% annual rate
- File again at a later date, your FRA, or age 70
As a result, you can then begin claiming a higher amount later on. People doing this often get a job after they’ve retired or inherit money and don’t need the extra funds to make ends meet.
How a Financial Advisor Can Help You Maximize Your Social Security Benefits
You’ve worked hard over the years and want to ensure you adequately plan for your retirement. This includes choosing when to begin collecting your federal retirement benefits. You may not realize you can collect more, depending on how you strategize.
The above tips are just a few of the numerous strategies you may be able to claim. Maximizing SSA benefits can be tricky. A financial advisor can help you identify various ways to increase your benefits, find which is most advantageous to you, and help you boost your overall monthly retirement income.
Many people find they need specialized advice when it comes to both Social Security and retirement planning. A professional can help you achieve your future retirement goals and identify ways to achieve them. Find a Financial Advisor Using Our Free Tool.
