Social Security planning is a crucial element in income stability during your retirement years. However, many people don’t understand how Social Security really works. As you near retirement, the decisions you make could have a significant impact on the amount of money you receive, so it’s important to educate yourself as best you can beforehand. Many individuals claim too early, miss out on important benefits, or fail to utilize strategies that could boost their lifetime income. Getting the most out of your benefits is anything but simple, but today it is important as ever to try. Here are a few ways you can potentially maximize your Social Security so that you can spend your retirement focused on doing the things you love.
Have A Game Plan
Plenty of individuals continue to work after they start receiving Social Security benefits in order to keep their retirement income abundant. Should you choose to go this route yourself, it is vital that you and your family are aware of the tax consequences that accompany an increased income. Unfortunately, a good portion of your payment could be subjected to federal taxes. These taxes can take from 50% to 85% of your benefit. However, you could avoid this by spreading out your income from various sources. This will help to alleviate any increases that could potentially lead to higher taxes.
Timing Is Everything
As goes for many things in life, timing is everything! Especially when it comes to your Social Security benefits. Individuals are able to claim Social Security a few years before or after their “full retirement age” (FRA), and your monthly benefit amount will vary as a result. Therefore, it’s important to pinpoint exactly when that age is. Your FRA, also known as your “normal retirement age,” determines when you are entitled to 100% of the Social Security benefits you’ve earned. In addition, delaying your benefits can also work in your favor. Typically, the full retirement age is considered 66, but if you would like to check for yourself, use the government-approved Social Security Retirement Age Calculator.
Holding off on requesting benefits could potentially help you in the long run. Delayed retirement credits will boost your check by 8% each year you hold off applying until age 70, which is when your benefit will max out. Similarly, if you and your spouse have both reached full retirement age, you can claim spousal benefits. By doing so, you will allow your own benefits to grow until you turn 70! But remember, in order to be eligible for spousal benefits, you and your significant other must have been born before Jan. 2, 1954.
35 is the Magic Number
Another way you can secure your maximum benefits is to work for a full 35 years before you consider retiring. The Social Security Administration determines your benefits based on your top 35 years of earnings, which is defined as the wages you make from your job, including any bonuses, commissions, and vacation pay, or your net earnings if you’re self-employed. If you have worked less than that, a zero will be assigned to any non-earning years. It is encouraged that individuals work longer in order to negate any zeros. This can help you take further advantage of top-earning years!
By choosing to follow the tips discussed above, you ensure that you are on your way to maximizing your Social Security benefits. While there are countless factors that go into claiming Social Security the right way, all those factors relate back to your individual situation. If you’d like to discuss your Social Security options and get a complimentary review of your finances, reach out to a member of our team today!