RetirEment planning

Before you file, learn how to max out Social Security.

Maximizing your Social Security benefits requires strategic planning and informed decision-making. Here are key strategies to help you enhance your benefits:

1. Delay Claiming Benefits

The age at which you begin receiving Social Security significantly impacts your monthly benefit amount. You can start as early as age 62, but doing so reduces your benefits. Conversely, delaying benefits increases them:

  • Early Retirement (Age 62): Benefits are reduced to 70% of your primary insurance amount (PIA).
  • Full Retirement Age (FRA, Age 67 for those born in 1960 or later): You receive 100% of your PIA.
  • Delayed Retirement (Up to Age 70): Benefits increase by approximately 8% for each year you delay past FRA, up to 124% at age 70.

For example, if your PIA is $1,000:

  • At 62: $700 per month.
  • At 67: $1,000 per month.
  • At 70: $1,240 per month.

2. Work for at Least 35 Years

Social Security calculates your benefits based on your highest 35 years of earnings. If you work fewer than 35 years, zero-income years are factored in, which can lower your average earnings and thus your benefits. Working additional years can replace low- or zero-income years, increasing your average and your benefit amount.

3. Maximize Earnings During Your Career

Higher lifetime earnings result in higher Social Security benefits. Since benefits are calculated based on your earnings, increasing your income—especially during your highest-earning years—can boost your benefits. Consider pursuing promotions, additional training, or side income opportunities to enhance your earnings record.

4. Coordinate Spousal Benefits

Married individuals have options to claim benefits based on their own earnings or up to 50% of their spouse’s PIA, whichever is higher. Coordinating the timing of claims between spouses can maximize total household benefits. For instance, one spouse might claim spousal benefits while the other delays their own benefit to accrue delayed retirement credits.

5. Be Mindful of Tax Implications

Social Security benefits may be subject to federal income taxes, depending on your combined income. To minimize taxes, consider:

  • Managing withdrawals from retirement accounts to control taxable income.
  • Utilizing Roth IRAs, as qualified withdrawals are tax-free and don’t count toward combined income.

Strategic planning can help reduce the portion of your benefits subject to taxation.

6. Correct Early Claiming Decisions

If you’ve claimed benefits early and wish to increase them, you have options:

  • Withdrawal of Application: Within 12 months of claiming, you can withdraw your application, repay the benefits received, and restart benefits later at a higher amount.
  • Suspension of Benefits: If you’ve reached FRA, you can suspend your benefits to earn delayed retirement credits, increasing your benefit when you resume them.

These options allow you to adjust your strategy to maximize benefits.

By implementing these strategies, you can effectively increase your Social Security benefits, ensuring a more secure retirement. It’s advisable to consult with a financial advisor to tailor these strategies to your individual circumstances.

You Don’t Have to Navigate This Alone
Making the most of your Social Security benefits can feel overwhelming, but you don’t have to figure it out on your own. At Drexel and Co., we specialize in guiding individuals and families through these decisions with care and expertise. Our goal is to help you make confident, informed choices that align with your financial goals and future.

Let’s Get Started
Schedule a consultation with us today to create a tailored strategy for maximizing your Social Security benefits. Together, we’ll build a plan that ensures you’re making the most of what you’ve earned.

 

Citations

  1. Social Security Administration: Retirement Benefits Guide
    https://www.ssa.gov/benefits/retirement/

  2. Social Security Administration: How Work Affects Benefits
    https://www.ssa.gov/benefits/retirement/planner/credits.html

  3. Social Security Administration: Benefits by Earnings
    https://www.ssa.gov/pubs/EN-05-10070.pdf

  4. Social Security Administration: Benefits for Spouses
    https://www.ssa.gov/benefits/retirement/planner/applying7.html

  5. IRS: Social Security and Equivalent Railroad Retirement Benefits
    https://www.irs.gov/taxtopics/tc423

  6. Social Security Administration: Suspending Benefits
    https://www.ssa.gov/benefits/retirement/planner/suspend.html

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