For many Americans, Social Security benefits are a cornerstone of their retirement plan. To make the most of these benefits, it is important to approach retirement with careful planning and forethought. With that in mind, the attorneys at Wilcox Attorneys, PA explain some common strategies you may wish to employ to help you max out your Social Security retirement benefits.
Delay Your Claiming Age
The age at which you begin to collect Social Security has a significant impact on your monthly benefit amount. While you can start as early as age 62, delaying until after your full retirement age (FRA) increases your benefits. For each year you wait, up to age 70, your benefit rises by about 8 percent. For instance, if your FRA is 66 and you delay until 70, your monthly payments could be 32 percent higher, providing increased income for the rest of your life.
Ensure a 35-Year Work History
Your Social Security benefits are calculated based on your highest-earning 35 years. If you work fewer than 35 years, years without earnings will be factored in as zeros, reducing your benefit amount. To avoid this, aim for at least a 35 year work history before claiming benefits. If your current income is higher than in earlier years, working beyond 35 years can also boost your average earnings, potentially increasing your retirement benefits.
Maximize Earnings While Working
The Social Security Administration calculates benefits using your average indexed monthly earnings (AIME) from your highest-earning 35 years. Increasing your earnings during your working years can directly impact your benefit amount. Pursuing higher-paying positions, additional income streams, or career advancements may contribute to higher benefits when you retire.
Plan Spousal Benefits Strategically
Married couples can often enhance their overall benefits by coordinating their claiming strategies. A lower-earning spouse may qualify for spousal benefits, which can provide up to 50 percent of the higher earner’s FRA benefit. Couples may also benefit by having the higher earner delay claiming benefits while the lower earner collects their own. This approach can optimize household income over time.
Account for Survivor Benefits
Survivor benefits are an essential consideration for couples, particularly when one spouse is likely to outlive the other. If the higher-earning spouse delays claiming benefits until age 70, the surviving spouse will inherit the increased benefit amount after their partner’s death. This can provide significant financial stability for the surviving spouse during retirement.
Be Mindful of Earnings Limits
If you begin collecting benefits before your FRA while continuing to work, your income may reduce your Social Security payments. In 2024, the limit for those under FRA for the entire year is $22,320. For every $2 earned above this threshold, $1 will be deducted from benefits. For individuals reaching FRA in 2024, the limit increases to $59,520. Once you reach FRA, no earnings limits apply.
Use Tax-Efficient Strategies
Social Security benefits may be subject to federal income taxes if your overall retirement income surpasses certain thresholds. Up to 85 percent of your benefits could be taxable if your income, including half of your Social Security benefits, exceeds specific limits. A financial advisor can help you plan withdrawals from retirement accounts to reduce tax liability and maximize your net income during retirement.
By understanding how these factors affect your Social Security benefits, you can make informed decisions to optimize your retirement income. Strategic planning, both before and after you begin receiving benefits, can ensure you enjoy the financial security you need during your retirement years.
Do You Have Questions about Social Security Retirement Benefits?
For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions about Social Security retirement benefits, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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