In the past, when Social Security was initiated in 1935, most Americans never relied on it as a primary income source for retirement. Today, times have changed with people living longer and guaranteed pensions almost obsolete, making Social Security benefits a reliable payment stream of income that is guaranteed by the federal government. This makes it especially important to apply strategies to maximize your Social Security financial benefits for your retirement planning.
According to the Social Security Administration in 2020 more than 50% of elderly Americans relied on social security benefits for at least 50% of their income, and social security benefits made up at least 90% of income for 1 in 5 married couples and almost 1 in 2 single persons. Social Security benefits also liberates 1.5 million American children out of poverty each year.
There are many complex planning options that can be applied to maximize social security benefits that determined by individual circumstances and should be discussed with your financial professional. The following are some general strategies that everyone can apply to increase the size of their Social Security retirement payments.
Work As Many Years As You Can
Although you must be over aged at least 61 years & 9 months (depending on birth year) and have worked at least 10 years (4 credits per year for 40 credits) to qualify for Social Security retirement payments (the credit threshold may be lower for disability benefits), working for 35 years or more will ensure you receive the most social security payments when your benefit is calculated. The Social Security Administration (SSA) calculates your benefit amount based on your lifetime earnings and adjusts it by considering the changes in average wages since you started working. Your earnings from your 35 highest-earning years are then averaged using an Average Indexed Monthly Earnings (AIME) formula to determine the benefit payment you will receive at your full retirement age. Based on the Delay Retirement Credits (DRC), your Social Security benefit amount increases by 8% each year after your Full Retirement Age (FRA) that you delay claiming your benefits until age 70. Therefore, you should work for as long as you can to achieve your maximum benefit payment.
Maxmize Your Earnings While Working
Since SSA determines your benefit amount based on your highest years of earnings, it makes sense to look for ways to increase your income. This may include taking on additional part-time/after hours or weekend work or generating income from a side business. Alternatively, if you scale back on work or semi-retire this can lower your Social Security payments. Also, income earned after age 60 is not indexed, meaning that the income you earn in your 60s can replace a year in which you didn’t work or had lower income. Your goal should be to maximize your highest earning years, striving to earn at or above the annual cap ($142,800 in 2021). It’s important to remember, there may be some tax consequences when increasing your income.
Claim Spousal Benefits
Another strategy to increase your Social Security payments is to claim spousal benefits if you or your spouse was born prior to January 2, 1954 and have both reached FTA. If you can claim spousal benefits and delay claiming your benefits, you will allow your benefits to continue to grow. Once you reach age 70, you can change to receive your higher benefits. To claim spousal benefits, your spouse must have applied for or is receiving their own Social Security benefits.
Next Steps
Accessing Social Security Benefits or Cash Assistance Program for Immigrants (CAPI) is often complicated, overwhelming and time consuming, preventing many from receiving these life-changing benefits. Statistically, individuals applying for benefits independently, are less than 40% successful, while Help Me Help You, Benefit Access Support advocates boasts 80% success rate of all claims submitted. To check your eligibility, complete our 1 minute Free Case Review and one of our Benefit Access Support advocates will contact you within 24 hours.
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