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How to Reap Maximum Benefits From Social Security

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The core of a person’s retirement income is Social Security, an umbrella term for the Old-Age, Survivors, and Disability Insurance program maintained by the Social Security Administration of the United States. The benefits of this program are accounted for inflation and will have one covered for the rest of their life.

The amount of a person’s Social Security payments depends broadly on two factors: earnings history and the age in which they redeem the benefits. When people approach their retirement age, they have to make the tricky decision regarding their Social Security retirement benefit. His income for the rest of his retired life depends on this crucial choice.

The secret to maximizing one’s benefits from Social Security is, in reality, not a secret at all. Here we discuss ways to increase your retirement income from Social Security:

Start early, start equipped: The one thing to keep in mind is: the higher the average income, the higher the Social Security benefits. Starting your professional life early is a good way to ensure higher average income by the time one retires. Another good way is to equip yourself with relevant skills and specialized education before embarking on a professional journey. This will not only ensure higher starting salaries, but will also increase social security benefits.

Maintain professional consistency: Suppose a person has gaps in their working life. Each gap year is counted as zero, bringing down the average earnings and thus, benefits. On the other hand, if they complete the full 35 years of service without any break, every additional year worked after that will replace one initial year of lower earnings, thus maximizing the average, and hence, the benefits.

Add more sources of income: A side hustle is a good way to increase one’s earnings and raise the average income for better benefits.

Keep it low: However, beneficiaries under full retirement age, earning more than $17,640 in 2019 will face decreased earnings of $1 for every $2 earned above the limit. Upon reaching full retirement age, the earnings limit becomes $46,920 and the penalty eases to $1 per $3 earned above the limit. Therefore, it is prudent to find ethical ways to show an income lower than the limit, upon retiring.

Leave the account untouched: Although this seems like contradicting the essence of the discussion, this actually is one of the best ways to maximize benefits. Leaving the benefits unclaimed at least till the full retirement age, i.e., 67, leads to higher and compounded benefits. Gains will be better if the benefits are left unclaimed till the maximum age of 70, as there won’t be any additional benefits post this age.

Moreover, monthly income gets significantly reduced for those who claim the benefits before full retirement age.

Claim Spousal Benefits: One can take advantage of spousal benefits as well, which is up to 50% of the higher earner’s benefit. Moreover, one can even claim social security benefits based on an ex-spouse’s work record, if the marriage lasted at least 10 years.

Additional Benefits of Having Children: If a person has minor children, they can claim payments from Social Security for them. This amount can go up to 50% of his retirement benefits, subject to certain yearly limits.

Be aware of the taxes: Once the sum of adjusted gross income, non-taxable interest and 50% of Social Security benefits exceeds $25,000 for individuals and $32,000 for couples, taxable Social Security benefits can go up to 50%. The percentage of taxable benefits increase with higher amounts. Thus, one should keep a check on these calculations, or visit a financial consultant for assistance.

Claim survivor benefits: Upon death, the surviving spouse is entitled to inherit the deceased person’s benefit if it’s higher than their own benefit. Again, delaying the claiming of this benefit will boost the gain.

A disciplined approach to earning and an informed entry to retired life takes you a long way. Charlotte A. Dougherty, founder of Dougherty & Associates, says, "Given today’s longevity it is more important than ever to maximize your Social Security benefit. Think of this as an annuity for your lifetime," and we couldn’t agree more.

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