Navigating Social Security benefits can be challenging, but with the right strategy, you can maximize your benefits in retirement. Here are some practical tips to help you get the most out of Social Security, ensuring a more comfortable and secure retirement.
Understand Your Full Retirement Age
Your Full Retirement Age (FRA) is when you’re eligible to receive 100% of your Social Security benefit. For most people today, the FRA falls between 66 and 67, depending on your birth year. Collecting benefits before reaching your FRA can significantly reduce your monthly payment, so knowing your FRA is the first step in maximizing your benefits.
Delay Your Benefits
Delaying Social Security benefits beyond your FRA can be beneficial. For each year you wait, up until age 70, your benefits increase by about 8%. This delayed retirement credit can lead to a significantly higher monthly benefit, offering more financial security in your later retirement years.
Consider Your Spousal Benefits
Spouses should coordinate their benefits to maximize their total income. Spousal benefits allow one spouse to claim up to 50% of the other’s FRA benefit amount, which can be particularly advantageous if one spouse has a significantly lower earnings history. Determining the best time for each spouse to claim benefits requires careful planning.
Work for at Least 35 Years
Your Social Security benefits are calculated based on your highest 35 years of earnings. If you have less than 35 years of work history, the calculation will include zero-earnings years, reducing your benefit amount. Working at least 35 years ensures that your benefit calculation doesn’t include these zero-earnings years, potentially increasing your monthly benefit.
Check Your Earnings Record
Mistakes can happen, and it’s not uncommon for earnings to be incorrectly reported to the Social Security Administration (SSA). Regularly checking your Social Security earnings record for accuracy is vital. If you spot any discrepancies, report them immediately to ensure your benefit amount reflects your actual earnings history.
Minimize Your Taxes
Understanding how Social and certain other types of income are taxed in retirement can help you make informed decisions that potentially reduce the amount of your benefits subject to income tax. Strategies such as withdrawing from taxable accounts before claiming Social Security can lower your combined income and reduce the tax impact on your benefits.
