How to Maximize Social Security Benefits

Over 50% of Americans list Social Security as the largest source of their retirement income. And when 90% of Americans age 65 and older receive Social Security benefits, that’s a staggering number of people who depend on monthly Social Security checks for survival.

In 2020, the maximum Social Security benefit per month is $3,011.00, but few people will actually receive that much in benefits. There are, however, some steps you can take to ensure that you earn as much as you possibly can.

Social Security calculates monthly benefits on the thirty-five working years when you earned the most money. If you have not worked at least thirty-five years, Social Security will calculate any year less than thirty-five as a zero, which will dramatically lower your average. Therefore, the best thing you can do to optimize your benefits is to work at least thirty-five years. Remember that you only earn Social Security credits for jobs where you and your employer pay into the Social Security system. Every year, you should make sure your earnings history is accurate and that Social Security taxes have been collected and recorded correctly.

The next step you can take is to work toward a promotion that pays more money. The more money that you make for which you are taxed and pay into Social Security, the higher your retirement benefits will be. If you cannot make any more money in your current position, consider taking on a second or part-time job.

After you’ve explored these options, consider delaying collecting your retirement benefits until you reach at least full retirement age. If you were born 1937 or earlier, you will reach full retirement age at 65. If you were born between 1943 and 1954, you will reach full retirement age at 66. If you were born in 1960 or later, you will reach full retirement age at 67.

Should you decide to collect retirement benefits before you reach full retirement age, as early as age 62, you will face a penalty that will permanently reduce your monthly benefits. And if you delay collecting benefits past the time when you reach full retirement age, your benefits will increase by about 8% every year you delay until you reach age 70. After you reach age 70, there is no additional increase for delaying collecting your benefits.

If, however, you begin collecting benefits before you have reached full retirement age and regret the decision before you turn 70, you can suspend your monthly benefit payments and either reduce or eliminate the early collection penalty altogether.

Furthermore, you might want to consider collecting spouse’s benefits. You can collect retirement benefits on your own record, or, if your spouse’s work record is higher, you can collect up to 50% of your spouse’s monthly benefit. And if your spouse pre-deceases you, you may be entitled to collect on your deceased spouse’s work record if it was higher than yours.

Similarly, if you have dependent children under age 19, you may be able to secure additional Social Security payments for them up to 50% of your monthly benefit up to the annual maximum family limits.

Lastly, you can decide to continue working into your retirement, but your benefits will be reduced if you make more money than the Social Security threshold for earned income prior to reaching your full retirement age. Regardless of what Social Security tells you, consider working with a financial advisor to discuss the full scope of your retirement options.