SUMMARY OF 15 WAY TO INCREASE SOCIAL SECURITY RETIREMENT BENEFITS Flashcards
WHAT ARE THE 15 WAYS TO INCREASE SOCIAL SECURITY BENEFITS?
1. Delay Taking Benefits
Waiting to claim until age 70 can increase benefits by about 8% per year after full retirement age (FRA).
2. Work for at Least 35 Years
Ensure you have 35 years of work history to avoid zero-income years in your benefit calculation.
3. Increase Your Earnings
Boost your earnings over your career, as Social Security benefits are based on your highest 35 earning years.
4. Claim Spousal Benefits
If eligible, claim spousal benefits, which can be up to 50% of your spouse’s benefit if it’s higher than your own.
5. Strategize Survivor Benefits
As a widow or widower, you can claim your deceased spouse’s full benefit if it’s larger than your own.
6. Minimize Taxes on Benefits
Keep your income below certain thresholds to reduce how much of your Social Security is taxable.
7. Recalculate After Retirement
If you continue working after starting benefits and earn more, Social Security may recalculate and increase your benefits.
8. Check for Errors in Your Earnings Record
Regularly review your Social Security statement to ensure your earnings are reported correctly.
9. File and Suspend (for Couples)
File for benefits at FRA and then suspend them to allow your spouse to claim spousal benefits while your own benefits continue to grow.
10. Switch to a Higher Benefit Later
If you start benefits early but later become eligible for a higher benefit (like spousal or survivor benefits), switch to the higher benefit.
11. Work in Jobs Covered by Social Security
If you spent time in jobs not covered by Social Security, moving to one that contributes can boost your benefit.
12. Coordinate Benefits with a Spouse
Couples can strategically time their benefit claims to maximize household income, delaying the higher earner’s benefits to age 70.
13. Avoid the Earnings Test
If you claim benefits early while still working, your benefits could be reduced. Delaying claiming until you stop working or reach FRA avoids this.
14. Take Advantage of Cost-of-Living Adjustments (COLAs)
By delaying benefits, future COLAs will be applied to a larger base benefit, giving you a bigger inflation-adjusted increase.
15. Divorce Benefits
If you were married for at least 10 years and are now divorced, you may claim Social Security based on your ex-spouse’s work record, especially if they earned more than you.
What are the benefits of delaying Social Security benefits?
- Delay past age 62 to increase monthly benefits.
- Full Retirement Age (FRA): 66-67 (depends on birth year).
- 8% increase per year for every year delayed after FRA, up to age 70.
- Maximum benefit is reached at age 70 (no further increases after this).
- Benefit at age 70 can be up to 32% higher than at FRA.
- Delaying ensures higher lifetime monthly payments.
Why is working for at least 35 years important for Social Security benefits?
- Social Security benefits are based on your 35 highest-earning years.
- Fewer than 35 years: Years with no earnings count as $0, lowering your average.
- More than 35 years: Extra years replace lower-earning years, increasing your benefit.
- Aim to replace low-earning years with higher-earning years to maximize your payout.
How does increasing your earnings affect Social Security benefits?
- Benefits are based on your highest 35 years of earnings.
- Higher earnings result in a higher average monthly benefit.
- Maximize income in peak earning years to replace lower-earning years.
- Aim to earn more each year up to the Social Security wage base limit (in 2024: $168,600).
What are spousal benefits, and how can they maximize Social Security?
- You can claim up to 50% of your spouse’s benefit if it’s higher than yours.
- You must be at least 62 years old, and your spouse must have filed for benefits.
- Delaying your claim until full retirement age (FRA) gives you the full 50%.
- Even divorced spouses (married for at least 10 years) may claim spousal benefits.
How can survivor benefits maximize Social Security?
- A surviving spouse can claim 100% of the deceased spouse’s benefit if it’s higher than their own.
- Available as early as age 60 (or age 50 if disabled), but full benefits at full retirement age (FRA).
- Maximize by delaying the deceased spouse’s claim until age 70, resulting in higher survivor benefits.
- Divorced spouses may also qualify if they were married for at least 10 years.
How can you minimize taxes on Social Security benefits?
- Up to 85% of Social Security benefits can be taxable, depending on income.
- To avoid high taxes, keep combined income (adjusted gross income + nontaxable interest + 50% of Social Security) below:
-$25,000 (individual) or $32,000 (couple) for no taxation.
-$34,000 (individual) or $44,000 (couple) for partial taxation. - Withdraw strategically from other retirement accounts to reduce taxable income.
How can working after retirement increase Social Security benefits?
- If you continue to work after claiming Social Security, your benefits can be recalculated.
- Higher earnings can replace lower-earning years in your 35-year record, boosting benefits.
- Social Security automatically recalculates annually if new earnings are higher than past earnings.
- Benefits may increase if you improve your average earnings after retirement.
Why is it important to check your Social Security earnings record?
Social Security benefits are based on your earnings history.
Errors in your record can reduce your benefit amount.
Check your Social Security statement regularly to ensure all earnings are correctly recorded.
Correct mistakes by contacting Social Security Administration (SSA) with proper documentation.
What is the file and suspend strategy, and how does it work?
- Available to those who reached full retirement age by April 30, 2016.
- One spouse files for benefits but suspends them to let their own benefit grow.
- The other spouse can claim spousal benefits while the suspended benefit accrues delayed retirement credits.
- This strategy allows one spouse to receive income while the other’s benefit grows until age 70.
How can switching to a higher Social Security benefit later increase your payout?
- Start with a lower benefit (e.g., your own benefit) and switch to a higher benefit (e.g., spousal or survivor) later.
- You can switch to spousal benefits after your spouse claims or to survivor benefits if your spouse passes away.
- Maximize by switching to the higher benefit at full retirement age (FRA) or delaying further for higher payouts.
- Useful for individuals eligible for multiple benefits (personal, spousal, or survivor).
How does working in jobs covered by Social Security affect your benefits?
- Jobs covered by Social Security contribute to your 35 highest-earning years.
- Non-covered jobs (e.g., some government jobs) may reduce benefits due to the Windfall Elimination Provision (WEP).
- Shifting to a covered job can help increase your benefits by contributing to Social Security.
- Ensure consistent earnings in covered jobs to maximize your benefit calculation.
How can coordinating benefits with a spouse maximize Social Security?
- Higher-earning spouse should delay benefits until age 70 for a larger payout.
- Lower-earning spouse can claim earlier to provide income while delaying the higher benefit.
- Maximizes overall household income by combining early and delayed claims.
- Increases survivor benefits for the lower-earning spouse if the higher earner delays.
How can avoiding the earnings test help maximize Social Security benefits?
If you claim benefits before full retirement age (FRA) and continue working, excess earnings can reduce your benefits.
In 2024, for every $2 earned over $22,320, $1 is withheld.
After reaching FRA, there’s no earnings limit—you can earn as much as you want without reducing benefits.
Avoid the earnings test by either delaying benefits until FRA or reducing income.
How do Cost-of-Living Adjustments (COLAs) increase Social Security benefits?
- Social Security benefits are adjusted annually based on inflation.
- Delaying benefits increases your base benefit, so COLAs are applied to a larger amount, resulting in bigger increases.
- COLAs ensure that benefits keep pace with rising living costs over time.
- Delaying benefits to age 70 maximizes both the base benefit and the effect of COLAs.
