Boosting Your Social Security Benefits: Top 7 Strategies
Boosting your Social Security income can significantly impact your retirement planning, as it makes up around 30% of income for individuals 65 and older. So, how can you increase your Social Security checks? Let's explore seven smart strategies.
Strategies for maximizing your Social Security
1. Pursue higher earnings
While you can't snap your fingers to get a higher salary, your Social Security benefit is based on how much you've contributed to the program. Committing to earning more income will lead to fatter checks. If negotiating a raise within your current role isn't feasible, you may consider hunting for better-paying jobs or taking on a side gig.
Remember that the IRS only considers your annual earnings up to a certain limit. In 2023, that limit is $160,200, while in 2024, it will increase to $168,000. So, even if you make millions, for Social Security purposes, your earnings will be capped at the taxable income limit.
2. Work at least 35 years
Social Security bases your benefits on your 35 highest earning years. If you work for fewer than 35 years, your retirement income might be lower since you'll have years with $0 earnings included in the average. Working at least 35 years will help boost your benefit, and extra years could lead to even higher payments if you replace lower-earning years with higher ones.
3. Strategically delay claiming
You can't collect Social Security until you reach your full retirement age (FRA), which is 67 for people born in 1960 or later. However, you can begin receiving benefits as early as age 62. While you might be eligible to start early, doing so will cost you around 30% of your full retirement benefit.
If you're looking to secure the maximum possible benefit, it's wise to delay your claim as long as possible, till age 70. Delaying your Social Security payments will earn you increased credits of 8% each year until you reach 70.
4. Continue working and deferring your benefits
If you choose to work past your FRA while delaying your retirement benefits, there are limits to how much you can earn before it impacts your benefits. In 2023, if your income exceeds $21,240 and you have not yet reached FRA, Social Security will withhold $1 for every $2 you earn. From the year you reach FRA up to the month you become eligible, they will deduct $1 for every $3 above $56,520. Once you pass your FRA, the Social Security Administration will no longer withhold any benefits as you earn.
Your benefits will be recalculated once you reach your FRA to account for the amount that was withheld earlier. If you’ve started claiming your Social Security benefits early and still have a job, this recalculation will help you retrieve the benefit you've missed out on.
5. Collect spousal or survivor benefits
If your spouse had significantly higher earnings than you, you can potentially increase your benefits by claiming spousal benefits based on their work record. Both current and ex-spouses (if the marriage lasted at least 10 years) are eligible for up to 50% of their partner's primary benefit. Spousal benefits are reduced if claimed before full retirement age, but they'll max out at age 67.
In the case of a deceased spouse, a surviving spouse could receive survivor benefits, which are up to 100% of the late spouse's benefit if they were already receiving it or up to 100% of their primary insurance amount if they had not yet started receiving benefits. You can claim survivor benefits as early as age 60, but they will be reduced.
This rule does not allow collectors to claim both their own retirement benefit and a spousal or survivor benefit. You can benefit from either your own benefit or yours based on your spouse's earnings, but not both.
6. Opt for a one-time do-over
If you've started getting Social Security before age 70 and now realize you could benefit from higher payments, there are two options. You may either withdraw your benefits within 12 months of approval and reapply later. However, you'll need to repay all benefits, taxes, and Medicare premiums you've collected. Alternatively, if you're already at FRA but have not turned 70, you can ask Social Security to suspend your benefits until your 70th birthday, which will result in higher delayed retirement credits.
7. Save and invest with a Roth account
While a Roth IRA or Roth 401(k) won't increase your Social Security payments, their tax-free withdrawals will help you keep more of your Social Security benefits. Traditional retirement accounts give you tax breaks on contributions, but you'll need to pay taxes on withdrawals. Roth accounts make you pay taxes upfront while giving you tax-free withdrawals during retirement, which can enhance the amount of your Social Security check you can ultimately put to good use.
Conclusion
Maximizing your Social Security benefit requires dedication, careful planning, and sometimes a little bit of patience. While it might take hard work and perseverance, the rewards are well worth it for a more comfortably secure retirement.
Strategically delaying your retirement until age 70 can significantly boost your Social Security income, as each year delay past your full retirement age earns you increased credits of 8%. Moreover, managing your finances wisely during retirement can also enhance your overall income. Saving and investing in a Roth account, such as a Roth IRA or Roth 401(k), can provide tax-free withdrawals that complement your Social Security checks, allowing you to make the most of your retirement money.
