“You’ve paid into the Social Security system your entire working life. Why leave any money on the table?”
Social Security is a complicated program for many Americans, who struggle to figure out what benefits they are eligible for and when they should apply for benefits. However, just because the system is complex, doesn’t mean you can figure it out. This article from The San Diego Union-Tribune titled “17 ways to get more from Social Security” can help.
Right now, now matter how far away your retirement date is, go to the agency’s website and create a “my Social Security” account. Make sure that all of the information about you, your earnings and the amount of money you have already paid into Social Security is correct.
Put in your 35 years of working. Your payments are based on your highest 35 years of income, so don’t skip out. Years with zero income will have a big impact on the average earnings calculation.
Work longer and delay your claim. If you can hold off on claiming Social Security, you‘ll be rewarded with a bigger monthly benefit. Yes, you can begin taking benefits as early as age 62, but your benefit will be reduced for the rest of your life. Every year you work beyond your full retirement, increases your benefit by 8% until you reach 70. Still working in your 60s and making good money? Keep working and bank more high-earnings years.
Alternatively, apply as early as you can. If your health is not great, start collecting benefits at age 62. True, you won’t receive as much money as you would if you held off, but you may get more money overall than if you waited for bigger benefits.
Don’t let the feds get your Social Security benefits. Here’s one of those big complications. You could lose a portion of your benefits to federal income tax. If you and your spouse file taxes jointly, up to 85% of your benefits could be taxable. However, that’s only if your adjusted gross income plus your nontaxable interest plus HALF of your combined Social Security benefits equals $44,000 or more. How do you avoid that tax trap? Work less in retirement or do more planning in advance. One tactic is to roll savings into a Roth IRA, because Roth withdrawals don’t usually count towards your taxable income.
Move to another state, if your state taxes Social Security. Look before you leap: some of the states that tax benefits may be more tax friendly than others.
Take advantage of spousal benefits. If your life partner has earned more than you, you can receive a benefit based on your own earnings or one that’s equal to 50% of your spouse’s benefits. Your spouse’s benefits won’t be impacted.
Divorced? If your marriage lasted more than ten years and you have not remarried, you can get Social Security benefits based on a former spouse’s earnings. Delay your divorce, if you can, to reach that ten year mark. If possible, push the finalization of the divorce back, if you are near the end of the process.
Talk with your spouse about their benefits and timing. If your spouse has similar income and your spouse is ready to retire at full retirement age, you could collect a spousal benefit while continuing to work past full retirement age yourself. The rules changed November 2015, but you may still qualify if you were born before January 2, 1954.
For surviving spouses and exes. If your spouse or your ex has died, you can collect their benefit amount if it’s greater than your own. You can do this starting at age 60. There is no need to wait until your full retirement age. However, you should be careful, since the amount is based on age, marital status, remarriage and other factors.
A second chance. If you took benefits at age 62, and then found a job, you can pay the money back to collect a larger benefit later. You can only do this once, and you only have 12 months in which to do it.
Unemployed? If you’re laid off and collecting unemployment, you might be able to collect unemployment and Social Security at the same time. Check your state’s rules—there may be a “claw back” provision to unemployment.
Don’t earn too much in retirement. Younger than full retirement age, Social Security cuts $1 from benefits for every $2 you earn over $17,640. Are you older than full retirement age? Benefits shrink by $1 for every $3 earned above $46,920.
Get a second or third opinion. Social Security can be complicated, and you don’t want to make an expensive mistake. Talk with your estate planning attorney to get their input about your situation, while you are having your estate plan created or reviewed.
Reference: The San Diego Union-Tribune (September 16, 2019) “17 ways to get more from Social Security”