4 Social Security Secrets to Even Bigger Checks | Smart Change: Personal Finances

(Christy Bieber)

More Social Security money can provide you with a more secure retirement. After all, cost-of-living adjustments are built into the program to help ensure purchasing power isn’t eroded by inflation. And the benefits are guaranteed for life.

Unfortunately, the average Social Security benefit is not very large, amounting to only $1,661 per month.

The good news is that there are ways to increase your benefits and earn more money with every check. Here are the Social Security secrets you need to know to make it happen.

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1. You can increase your allowance by claiming it later

Many people don’t really understand how the age at which you apply for benefits affects the amount you receive. But it can actually have a bigger impact than almost any other decision you make.

Each retiree is assigned a full retirement age (FRA). For those born in 1956 or later, it’s between 66 and four months and 67 years old. But you don’t have to apply for benefits at this age. You can start checks at age 62. However, for each month you receive a check before your FRA, your payments decrease. On the other hand, you can wait past your FRA, and for each month you delay until age 70, your benefits increase.

The impact of early or late reporting is profound. If you start receiving benefits at age 62 and your FRA is age 67, your monthly payments could be up to 30% lower than your standard benefit would have been had you waited. But they could increase by up to 24% over your standard benefit if you start at age 70.

If you simply wait an extra year or more to get Social Security, your checks will be much bigger and provide you with a bigger monthly income for the rest of your life.

2. Working more years at a higher salary will help your benefits

Benefits are also based on your income, not just the age at which you claim them. Your standard benefit at full retirement age is equal to a percentage of your inflation-adjusted average salary during the 35 years when your salary was highest.

This means, at a minimum, you’ll want to work 35 years to avoid including years of $0 earnings when your average earnings are calculated, as this will lower your Social Security checks. But it may actually be beneficial to work even more years if your salary has increased over time.

For each additional year of work beyond the age of 35, one of your years of work will not be taken into account in the calculation of your benefits. So spending more years at a higher-paying job means you can override some low-earning years in the formula used when calculating your check amount.

3. Coordinating with your spouse can help increase your combined benefits

If you’re married, you might be surprised how much of an impact coordinating with your spouse can have on the amount of your Social Security benefits.

If you are married, you may be able to apply for spousal benefits instead of your own pension benefits. Spousal benefits can reach up to 50% of your partner’s standard benefit at full retirement age. However, you can only get them if your partner has already applied for retirement benefits. So you’ll need to decide whether the higher earner should start checks as soon as possible so that spousal benefits can also start.

On the other hand, in some cases, it would be advantageous for the higher earner to delay their claim so that they can maximize their most important benefit. It would also result in more survivor benefits, since the last surviving person in your marriage keeps the higher of the two checks that either partner received.

If a lower income can claim money to keep the family afloat, it could allow the higher income to delay. This may be the best choice for some families.

4. The right type of retirement plan will allow you to keep more of your Social Security money

Finally, you’ll want to think about the type of retirement account you use to save money.

Social security benefits become taxable as soon as accounting income exceeds a certain threshold. But only distributions from traditional IRAs or 401(k)s count in determining whether the benefits are taxed — distributions from Roth accounts won’t count.

If you want to be able to withdraw as much from your investment accounts as you want without worrying about making Social Security taxable, you should seriously consider investing in a Roth throughout your career. This could leave you with bigger Social Security checks, since you won’t have to give the IRS a cut.

Now that you know these four big secrets to maximizing your monthly Social Security payment, we hope you can make the choices you need to ensure your financial security as a retiree.

The $18,984 Social Security premium that most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help boost your retirement income. For example: an easy trick could earn you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.

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