Social Security, combined with your 401(k) and IRA savings, can help you retire comfortably. Social Security was never meant to be your only source of retirement income. Here are 10 ways to help you get the most out of your Social Security Benefits:
1. Know How Benefits Are Calculated
Social Security calculates benefits based on your thirty-five highest-earning years (your earnings through the year you turn 59 are adjusted for inflation). If you didn’t work for 35 years, those missing years will be added as zeros to make 35 years, lowering your benefit. Working more years can improve your average income and boost your benefits by replacing any zeros or lower earnings.
2. Age Isn’t Just a Number
Your full retirement age (FRA) is when you can receive 100% of your benefits, which varies between 66 and 67 depending on the year you were born. Knowing your FRA helps you decide the best time to start collecting benefits.
3. Timing is Everything, so Get it Right
You can start collecting benefits at 62, but you’ll only get between 70 to 75% of your full benefit, depending on your FRA. If you wait until 70, you’ll receive between 124% to 132% of your full benefit, depending on your FRA.
If you regret starting early, you can stop and repay all benefits you received within the first 12 months of receiving them. If you have reached your FRA, you may stop them and start earning delayed retirement credits on your current benefit amount, but you don’t have to pay anything back.
4. Use Spousal Benefits Wisely
If you are divorced but were married for at least 10 years, you can claim your spouse’s benefits and receive a benefit equal to 50% of your ex-spouse’s benefit. A current spouse only must be married for one year. To receive the full 50%, you must wait until your FRA to claim any benefits and your spouse must be receiving their own benefit.
There are exceptions to this rule for an ex-spouse and other factors apply, so speak with a SS Advisor.
5. Check Your Social Security Statements
Once you turn 60, the Social Security Administration sends a statement with your estimated benefits and your earnings record every year, three months before your birthday. We recommend creating a My Social Security Account online at SSA.gov.
Note: If you create an online account, you will no longer receive statements in the mail.
Make sure the information is correct to avoid errors in your future benefits. If you do find a mistake, Social Security will make you submit actual W-2s to correct your record and they will only allow self-employed to go back three years!
6. Not Everyone Receives the Same Benefit Amount
The more money you earn each year, the higher your benefit will be. You may only need 10 years of earnings to qualify, but you would receive a very small benefit.
7. Work While Retired
You can work and collect Social Security, but if you haven’t reached your FRA, you may have benefits temporarily withheld if you earn over a certain dollar limit. The month you reach FRA the earnings limit ends.
8. Manage Your Taxes
Your Social Security benefits can be taxed, depending on your Modified Adjusted Gross Income and your filing status. Consider all your income sources to avoid unexpected taxes on your benefits.
9. Collect Survivor Benefits If Available
If your spouse passes away, you can start receiving survivor benefits at age 60. The benefits will be reduced if you claim early, so it may be better to wait until FRA. Other factors may affect you, so speak with a Social Security Advisor.
10. Don’t Follow the Crowd
Everyone’s situation is different, so your Social Security strategy should be tailored to your age, needs, and other retirement assets. A personalized plan can help you make the most of your benefits.
Pro Tips
- A financial advisor can help you understand Social Security strategies and plan for retirement.
- Use a retirement calculator to figure out how much you need to save to retire comfortably.
- Contact AMAC’s Social Security Advisory Service for free guidance from nationally accredited advisors. Get help understanding risks, benefits, timetables, all things Social Security (note: SS Advisors are not financial advisors). Call 888-750-2622 or email [email protected].