8 Ways to increase Social Security Benefits
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8 Ways to Enhance Social Security Benefits
Delaying your start date is a way to ensure the highest monthly return, but there are other options worth exploring.
Written by Liz Weston, CFP(r) Senior Writer | Personal finance, credit scores, economics Liz Weston, CFP(r), is a personal finance columnist, co-host on the “Smart money” podcast Award-winning journalist and writer of 5 books on finances, which includes the best-selling “Your credit score.” Liz has appeared on numerous national radio and television programs such as”Today” show “Today” program “NBC nightly news,”” the “Dr. Phil” show and “All Things Considered.” Her columns are carried in the media by The Associated Press and appear in hundreds of media outlets each week. Prior to NerdWallet, she wrote articles for MSN, Reuters, AARP The Magazine and the Los Angeles Times. She lives in Los Angeles with a husband along with a daughter and a golden retriever who is a co-dependent.
Dec 21, 2022
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More Like This
Finding ways to increase Social Security benefits is important because those checks are likely to be a major source of income when you retire.
A lot of people don’t know the way Social Security really works. They claim too soon, do not receive on important benefits and do not make use of strategies that could boost their lifetime income. These mistakes could cost them as much as $250,000, as researchers have estimated.
There are 8 ways you can increase the amount of your Social Security benefits.
In this article and Show More
1. Delay your application
Social Security retirement benefits grow approximately 5% to 7% each year that you delay between the earliest age of claiming of 62 and your full retirement age, which is currently two months and 66. reaching 67 for those born between 1960 and.
The return you get increases if you can wait beyond your retirement age. Increase your payout by 8% for each year you hold off applying until you reach age 70, at which point the benefit is at its maximum.
Pro tip: Most people prefer to delay their application, according to a large amount of research taking into account the longer lifespans, prevailing rates of interest and survivors’ benefits. Financial planners often encourage their clients to use other resources, such as retirement savings, if it lets them put off applying for.
2. Work longer
Social Security is based on the highest earning 35 years. You may be able to get more benefit working longer if you’ll be able to replace one of your less-paid years with a higher-paid one.
Individuals who were able to take time off to help raise children or had other interruptions in their work could find working longer to be especially helpful in increasing their benefits. (Note that if you start Social Security early, continuing to work can temporarily cut your benefits.) Additionally, women’s earnings are more likely more than men’s will increase later in life, thereby increasing the possibility of getting paid if you continue to work.
Pro Tip: If you start Social Security early, your benefits will be cut by one dollar for every $2 you earn in excess of a certain limit, which is $21,240 in 2023. This test for earnings expires when you reach your full retirement age, so it’s usually recommended to wait until the time you reach that age to apply.
3. Earn more
Another method to boost the size of your Social Security pay is to maximize your earnings over as many years as you are able to. “Maxing out” in 2023 means that you’ve earned more than $160,200, which is the highest amount of income that is subject to the 6.2 percentage Social Security payroll tax. If you earn the maximum amount during all of your 35 highest-earning years, you’ll qualify for the highest Social Security benefit at your full retirement age. That’s $3,627 a month in 2023.
Pro tip: Often, self-employed people will try to reduce the portion of their income subject to taxation on payroll, but that maneuver can come back to bite them when it’s time to apply for Social Security. A little bit of extra tax in the short term can pay off in the form of an ongoing stream of more and inflation-adjusted earnings.
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4. Consider your spouse
Certain spouses with lower earnings could benefit more benefit from an spousal benefit rather than using their own retirement benefits. Spousal benefits may be up to 50% of what the higher earner receives at his or her fully retired age. The amount is reduced when it is started earlier. The spouse with the highest earnings needs to be receiving an income-based retirement benefit from the other partner in order to be eligible for an spousal benefit. Prior to this, higher earners were able to “file and suspend” to allow their benefits to grow, but that’s no longer an option.
When you apply, Social Security will compare the benefits of your spouse against your own retirement benefits and give you the larger of the two. Most of the time it is not possible to transfer from a spousal benefit to your own benefit in the future, even if your benefit is greater. (People born prior to Jan. 2 1954, are given the option of filing an “restricted application” for benefits related to spousal support only and then switching to their own benefit later.)
Couples should also think about survivor benefits while they make Social Security decisions. If one spouse dies the survivor will start getting only one check, the larger of the two checks the couple received. The drop in income from the check lost could be substantial. Couples can help mitigate the impact by making sure the remaining check is as large as is possible. That typically requires having the earner with the highest earnings delay the beginning of Social Security, preferably at a minimum until retirement age.
Pro tip: Coordinating benefits with your spouse can become complicated. Consider using the Social Security claiming calculator to explore your options. You can find a free version on the AARP website as well as the option to pay for a more sophisticated versions at Social Security Solutions ($20 and up) or Maximize My Social Security ($39 and up).
5. Investigate divorced spouse benefits
If you’re unmarried and a previous marriage lasted at least 10 years, you may be eligible for spousal benefits based on your ex’s work records. The amount can be up to 50 percent of the employee’s benefits when he or she reaches complete retirement. If you decide to remarry the divorced spouse benefit is canceled. You must be at least 60 to be eligible for the benefits of spousal support.
If your ex-partner has passed away and the marriage lasted at least 10 years, then you could qualify for survivor benefits up to 100% of the ex’s benefit. Remarrying at 60 or over (or 50 and older if disabled) and still receive benefits for divorced survivors. Survivor and divorced survivor benefits can begin at age 60 or 50 if the survivor is disabled, or at any age when you’re caring for the child of your ex-partner who is younger than 16 or has disabilities (and in this case, the 10-year marriage requirement is waived). People receiving survivor benefits can change to their own benefits in the future if it’s greater or less.
Pro tip: Your ex must be at least 62 for you to qualify for divorced spousal allowance, but does not need to receive her own benefit. (That’s distinct from regular spousal benefits which typically need the worker who is primary to be in before spouses can be eligible for benefits.) Survivor benefits are determined by what your ex was getting or could have earned when they reached full retirement age. (If the ex delays starting benefits beyond full retirement age, the survivor benefit is multiplied by the delay retirement credit.) If you start benefits before your full retirement age however, the amount you get will be cut in half.
6. Add your minor child
If you’re receiving Social Security retirement or disability benefits, your child could have the right to receive the same benefit. Minor children who are not married may be eligible for up to 50 percent of the primary employee’s retirement or disability benefits. This benefit for children typically expires at age 18, but may extend to age 19 if the child is still at high school. Child benefits are also available for those who are 18 or older who are disabled, and the disability was first discovered before turning 22.
There is an “family maximum” which limits the amount a family can collect on the basis of one worker’s earnings history. The maximum is between 150% and 188 percent of the monthly income at retirement age. If your family’s total benefits exceed the limit and the worker continues to receive a regular check but the dependents’ checks will be cut in proportion.
Pro tip The benefits for families, including child and spousal benefits can be subject to the Social Security earnings test and can be reduced or eliminated if the primary worker starts benefits early and continues to work.
7. Suspend your benefit
If you started Social Security early and decided it was a mistake, you are able to revoke your benefit at the time you attain . That will allow your benefit to be credited with an earned delayed retirement benefit that increases the amount you get by 8% each year that you delay it until 70, the point at which your benefit maxes out. You do not have to repay the benefits you’ve earned.
Suspending your benefit, however, also suspends the benefit of any other person who receives checks based on your job record, for example, your spouse or minor child. The potential increase in your earnings could not be enough to offset the loss of the benefits your dependents receive.
Pro tip A few times Social Security workers incorrectly tell that they can’t suspend benefits. If that is the case take them to this page on the site.
8. Do it again
If you change your mind within a year of applying for Social Security, you can make a withdrawal and pay back everything you’ve earned in benefits. It will set the clock back for your benefits so that you’ll get the 7% to 8percent increase in your annual benefits by delaying your application. You can do this only once in your lifetime and you aren’t allowed to withdraw your application after 12 months.
Pro tip: Withdrawing your application is not the same as suspending your benefit. You can suspend your benefit orally or in writing any time after reaching the age of full retirement. In order to withdraw, you must fill out the Social Security Form SSA-521 in the first one year of applying and pay an amount equivalent to all benefits you and your family have received, including any Medicare premiums that are deducted from your paychecks.
The author’s bio: Liz Weston is a columnist at NerdWallet. She is a certified financial planner and author of five money books including “Your Credit Score.”
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