How to Maximize Your Social Security Benefits
Now that you understand a little more about how Social Security retirement benefits work, and how important this income stream can be to your retirement, here are some tips to help you get the maximum Social Security benefits you are entitled to.
Maximize Your Social Security Earnings
Your retirement benefit is based on your top 35 years of earnings so it’s important to get as many “high earning” years in as possible. If you’re at the top of your career as far as income goes, working just one year longer in a high paying job could make a big difference in your retirement benefit.
Delay Taking Your Social Security Benefits
Under the current Social Security Act, you are penalized for every month you take your Social Security benefits before you reach your full retirement age, with the maximum penalty being 25%.
While starting your benefits early might be tempting, those who are patient can increase their benefits by up to 30% (including COLA adjustments) by waiting until full retirement age. And for every year you wait to collect benefits after full retirement age, you’ll gain an additional 8% in benefits.
Work Part-Time During Retirement
While you are limited in how much you can earn if you are under full retirement age and collecting Social Security, once you reach full retirement age you can earn as much as you want without your retirement benefits being reduced.
Given this, and given the recent stock market performance, another idea for people who are retiring soon is to take a part-time job after you retire so that you can delay taking Social Security benefits for as long as possible.
Collect Benefits Based On Your Spouse’s Earnings
If you’re married, you can withdraw Social Security retirement benefits based on your own earnings, or you can collect half of your spouse’s benefit, whichever is larger. If you and your spouse aren’t the same age, you may need to do some planning to make sure you maximize your benefits, but this is definitely a strategy to consider if one spouse earns significantly more than the other, or if one spouse has been out of the work force for many years.
Tap Into Your Ex’s Social Security Benefits
The spousal benefit applies to ex-spouses too. If you were married to your ex-spouse for at least 10 years, and you aren’t currently married to someone else, you can collect up to 50% of your ex spouse’s benefits. You don’t have to communicate with your ex-spouse to claim your benefits; in fact they will never know unless you tell them, and it won’t affect their benefits in any way.
Also, unlike the spousal benefit, ex-spouses don’t have to wait for their ex-spouse to start collecting benefits… they can apply for Social Security based on the ex-spouse’s earnings as soon as they are eligible (i.e., age 62, however, your benefits will be reduced for every year you collect before you reach full retirement age).
As you can see, there are things you can do to increase your retirement benefits. With higher taxes, lower returns on investments, and the possibility of inflation down the road, it’s important that you get the maximum Social Security benefits you are entitled to.