Social Security provides millions of Americans with a stream of income they rely on upon retirement.
There is always room for future and current recipients to get more from their benefits. This is more so for recipients that are not getting a cost-of-living adjustment for 2020.
Figuring out the appropriate time to apply for benefits, and the benefits you are eligible for is somewhat a headache.
It induces calculations and navigation of more than 2,700 rules that govern the program’s payouts.
Fail to make the appropriate decision and you are likely to leave thousands of dollars on the table, or even more.
Here are some tips to help you maximize on the benefits…..
Work as long as the Social Security expects you to work.
The Social Security Administration tends to look at your income over a 35-year career while calculating your benefits.
When you work longer than this period, SSA picks the highest-earning 35 years. Your pay is indexed to reflect the inflation throughout your working years.
However, when you work for less than 35 years, SSA inserts zeros to arrive at the average earnings hence reducing your benefits.
People considering early retirement might have to think twice the moment they realize the impact such an idea would have on their Social Security checks.
It pays to wait
You can start to collect Social Security benefits as early as age 62. However, the longer you wait, the higher your spouse or ex stands to be paid.
Wait until you are 70 and the payment will increase by 76%.
This is because you will be earning the so-called delayed retirement credits that equate to 8% a year including inflation for every year delayed.
Nevertheless, there is no advantage to waiting past 70 years since at that point, the delayed credits stop to accrue.
Claim spousal benefits
You may be entitled to receive Social Security benefits in accordance to your spouse’s work history besides your own.
The government pays your benefits first, however, if the benefits that you are entitled through your spouse are higher, you tend to receive a combination that equals the spouse’s benefit.
In this case, the earlier you collect the benefits the less you will receive. The maximum you may get is up to half what they qualify for at full retirement.
Divorcees qualify for similar benefits as long as they were married for at least 10 years. You should know that in case you remarry, you can’t collect benefits based on your former spouse’s record except in the event the later marriage ends.
A strategy to help couples maximize the benefits received entails the spouse earning a bigger Social Security payment to file for benefits, then suspend them.
This allows the other spouse to claim only spousal benefits whilst the higher earner waits until age 70.
Such a scenario results to an individual collecting only a spousal benefit meaning they can leave their own Social Security untouched and rack up credits for a bigger payout years later.
Do not remarry before age 60
Remarrying before you are 60 years means you lose the right to claim spousal benefits based on an ex’s work record as long as you remain remarried.
In case your ex or spouse is dead, you cannot claim a survivor benefit the moment you remarry unless you do so after you turn age 60.
Avoid work-related benefit reductions
Social Security expects participants that have not attained full retirement age to forfeit some benefits in case they earn more than the set threshold amounts.
For 2020, people that will not attain age 66 during the year will be required to give up $1 of benefits annually for every $2 earned above $15,720.
When you turn 66 in 2020, the limits tend to be higher whereby you lose $1 for every $3 earned above $41,880 prior to the 66th birthday.
This is a significant reason why a number of people who prefer to keep working delay Social Security even though they are technically eligible to take benefits.
Keep your benefits free of income tax.
Many people that intend to retire do not realize that Social Security benefits are subject to income tax on some occasions.
Add up taxable income derived from other sources plus half your Social Security benefits. If this results to more than $32,000 for couples or $25,000 for singles, you might end up paying income tax from a portion of your benefits.
You can fix this by using non-taxable income sources such as Roth IRAs to supplement the Social Security income. However, in worst-case scenario, you may have to include in so far as 85% of the benefit as taxable income.
Get professional advice
Navigating through Social Security system and planning for retirement can be a complex business.
When you come close to retirement, sit down with a personal finance specialist or an accountant who can help map out how to proceed.