For most retirees, Social Security comprises an important part of their overall budgets. Yes, you should still plan for another form of income, but why not max out your potential Social Security benefits? These six methods can help you get the largest benefit check possible for your situation.
Work at least 35 years. Your benefits will be calculated based upon a formula that averages your 35 highest-earning years. If you have zeros averaged into this formula, your final benefit will be lower. If you can, stretch your career to last at least 35 years to avoid this pitfall.
Make sure the records are correct. Considering the importance of these calculations, it’s important to ensure that Social Security is plugging the correct numbers into their formula. Mistakes can and do happen! Access your earnings report by visiting your local Social Security office, or by logging into their system online (www.socialsecurity.gov). Report any discrepancies in your earnings record before you retire.
Time it right. Your full retirement age, based upon your date of birth, will be the age at which you can claim your full scheduled benefits. This age falls between 65 and 67 years old. Social Security does allow you to claim benefits as early as age 62, in exchange for a permanent reduction in your monthly checks (as much as 25 percent). Avoid that, if at all possible, and wait until your full retirement age to claim benefits.
Or, if you really want to max out your monthly checks, you could wait beyond your full retirement age to file your claim. For each year that you wait, up until age 70, you can earn a check that is about 8 percent larger.
Consider a move. Some states actually include Social Security benefits as part of taxable income. Many retirees move to a more tax-friendly state, in order to avoid those taxes.
Avoid federal taxes. Did you know that part of your Social Security benefits can actually be taxed, if your overall taxable income goes over certain thresholds? Working with a financial planner to anticipate these taxes, and establish forms of non-taxable income in retirement, can help you to avoid this situation. We can discuss this issue at your next appointment, if it concerns you.