Social security offers retirees and others a secure, steady income and helps many afford their golden years. Given that you will be getting reliable money for the rest of your life, many people want to maximize their monthly check. But how does one do it?
By and large, you have three levers to maximize your Social Security income:
n Work longer. The more years you work, the more money Social Security pays, up to your best 35-year income.
n Earn more. If you pay more into the social security system, your later payout will be higher up to a certain point.
n Delay your advantage. If you wait longer to take advantage of your benefits – up to the age of 70 – you will receive a higher monthly payment.
But these methods are only part of the story, and those looking for a bigger performance check have a few other ways to increase their payout.
1. Work for more years
While you can’t always get a higher salary, you might be able to work longer hours, and this is the first step in getting your Social Security paycheck to the full.
“Social security benefits are calculated based on the 35 years of service that your salary was highest,” said Mark Bodnar, CFP, financial advisor at Octavia Wealth Advisors in Cincinnati. “This is important to take into account because if you haven’t worked in 35 years, zeros will be taken into account, which will lower your overall payout.”
But even if you’re 35 years under your belt, adding a few extra years of higher income can add to your average.
“If a person already has a full 35-year income record, the only way that extra income can make a difference in future benefits is if it causes a previous year’s lower income to fall off the record,” says Beth Lynch. CFP, Financial Advisor at Fort. Pitt Capital Group in Pittsburgh.
Later in your career, you will likely make more money than you did at the beginning of your career. So if you can earn more and remove some of those earlier years from the calculation, you will get a higher social security benefit.
However, working longer brings you several other benefits: you can accumulate more savings and start drawing assets in your retirement plan, such as retirement plan. An IRA or 401 (k).
2. Make more money
The next obvious lever you need to pull in order to get a Social Security paycheck is to make more money. Social Security uses a formula that takes into account how much you’ve paid into the system. The more you’ve deposited, the greater your advantage – up to a point.
Social Security tax your wages 6.2% each year, and your employer pays an additional 6.2%, up to $ 142,800 (for 2021) in income. When you pay tax on the maximum amount, you get the highest possible Social Security payment, all else being equal. So if you pay tax on the maximum amount, which tends to increase every year, then you are increasing your contributions to the system.
For those who have paid the maximum taxable amount throughout their working lives and who have received full benefits by the age of 70, the initial payout in 2021 is $ 3,895. This number gives you the high end of what to expect, although thanks to adjustments, that number should increase over time.
But even if you don’t make that much before you retire, you may still be able to increase your check.
“Work in retirement to increase your benefit payout,” says Lynch. “A person who continues to work after applying for benefits may also be able to improve their performance. Retirement income continues to be entered on a person’s income record. “
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3. Delay your advantage
Delaying your performance will increase your performance test, but there is a limit to how far it will go.
You can get your social security benefits from the age of 62 but get less than if you had waited to reach full retirement age (67 years old for those born in 1960 or later). If you want the biggest check, you can wait until you are 70, but you won’t get anything if you wait after that.
“In the case of late benefits, an individual 8% of late credits are brought in for each year after reaching full retirement age,” says Lynch.
So if your retirement benefit is $ 1,000, you can get $ 1,080 per month by waiting a full year. However, you don’t have to wait all year to claim some of the increase. This means that for every month in which you delay your benefit, you will receive 2/3 of 1% more benefit, which is only the annual rate of 8% divided by 12 months. So if your retirement age is 67 and you wait three full years to reach 70, you can claim 124% of your full benefit.
Also, by delaying your performance, you get another “boost” – the Cost of Living Adjustment (COLA), which tends to increase the monthly payout over time.
“This will allow a person to start out at a higher level of performance and get bigger ‘rewards’ each year as the annual COLA is applied to the higher amount,” says Lynch.
Here is the best age to get your social security benefits.
4. Married? Divorced? You have options
Social security offers many benefits to people in many different scenarios, and some of the most complex decisions come about when you are married or divorced. Spouses and ex-spouses must therefore carefully consider which options are best for them, especially in the area of survivor benefits when one spouse has died before the other.
“When you’re married, you need to consider your spouse,” said Eric Bond, an investment advisor with Bond Wealth Management in the Los Angeles area. “How much the surviving spouse receives on the death of the first spouse depends on when that deceased spouse took up social security.”
“The greatest benefit stays in the household when a spouse dies,” said Beau Henderson, senior retirement specialist at RichLife Advisors in Gainesville, Georgia. “So we need to think about the impact of our entitlement choices on both lives. There are many scenarios and they have to be modeled to get the best result. “
And just because you are divorced doesn’t mean you can’t get social security benefits on your ex-spouse’s income. But there are special requirements that you have to meet.
The existence of a spouse or ex-spouse makes the planning process difficult and means you need to model more scenarios to see what will maximize your benefits.
5. Work with a specialist financial advisor
“There are over 500 ways to claim your benefit, and most Americans claim without thinking about that choice, which averages 40% of their retirement income,” says Henderson. “Only 4% of people in the US choose the optimal utilization strategy that will bring them the most money over their life expectancy.”
Because of this, it may make sense to work with a financial advisor who specializes in claiming social security benefits, especially if you find yourself in an unusual situation.
“Social Security officials are not allowed to give advice, and the majority of financial advisors do not help with this benefit because they are not trained in the area or are not paid,” says Henderson.
Because of the complexity of the program – the result of trying to help people in many different situations – you may need specific advice in order to find the best solution for you. And it can be worth it, even if it could cost you some money in advance.
Here’s how to find a financial advisor who will work in your best interests and what to look for.
Getting a larger Social Security check is easier when you’ve focused your entire work life around this goal. But even if it only takes you a few years to collect your check, there are still a number of things you need to do to gain your edge, and even waiting a few years can increase your payout significantly, and so do so permanently.
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