Maximizing Your Social Security Benefits

Maximizing Your Social Security Benefits
December 3, 2014 Pat Berg

Social Security might not feel like a benefit when the tax is coming out of your paycheck, but the income it provides can make a real difference once you’re finally retired. This predictable, unending income stream often helps retirees make their savings last while providing priceless peace of mind.

That doesn’t mean, however, that you should take your Social Security income for granted. There are ways that you can maximize the benefit and help it have an even greater impact on your post-retirement budget.

Increasing Your Social Security Income

Wait to take Social Security benefits: You can begin receiving benefits as early as age 62, but should you? When you decide to take your benefit early, you affect the payment you’ll receive for the rest of your life, reducing it by as much as 25 percent. If you can hold out and wait until you’re past full retirement age, you’ll actually increase your payments—for life. One way you can help yourself postpone taking Social Security benefits is to create other predictable income streams by investing some of your retirement savings into an annuity with a guaranteed income rider.

Work longer: You may be ready to retire, but that doesn’t mean you should. The longer you work, the more your Social Security income grows because your retirement benefit is based on your highest 35 years of earnings. Additionally, because working longer often pushes back the date you take benefits, it helps increase the income you’re entitled to (as described above).

Consider spousal benefits: Social Security affords married couples something called spousal benefits. This means that a lower-earning spouse can choose to take half of the higher-earning spouse’s benefits, rather than his/her own. Or, a higher-earning spouse can choose to take spousal benefits through the lower-earning spouse in order to delay taking his or her own until age 70, effectively increasing his/her payout. However, remember that to take your spouse’s benefits, he or she must have applied to collect benefits. Your spouse can then suspend his/her benefits in order to delay withdrawals and increase future Social Security payouts while you still receive your spousal benefit. It is worth considering that if you take your spousal benefit before reaching full retirement age, it will reduce your personal Social Security income the same way it would if you were taking your own payout.

Find out if you get a divorced spouse’s benefit: If you were married to your former spouse for at least 10 years and you’re both eligible for benefits, then you may be able to collect as much as 50 percent of his or her Social Security benefit, even if he or she has remarried. Note that if you have remarried, you will not be able to claim benefits from your first spouse unless your second spouse is deceased.

Reduce Your Expenses

Look for ways to reduce your cost of living while Social Security raises your benefit: Social Security provides for a cost-of-living adjustment (COLA) each year. If you can, find a way to reduce your overall cost of living. Then, when Social Security increases your payout, you can save or invest the difference and grow that income.

Consider the impact of taxes: If your adjusted gross income, tax-free interest, and 50 percent of your Social Security income adds up to $25,000 or more ($32,000 or more for married filers), then your benefits may be taxable. By limiting distributions from other income sources, you can reduce the likelihood that your benefits will be taxed, which will maximize the overall benefit.

The Social Security system was designed to allow everyone a more comfortable, secure retirement. Be sure to contact your financial advisor to help you understand what you’re entitled to and that you do the best you can to get the most for your benefits.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or products may be appropriate for you, consult with your financial advisor.

The Retirement Pros
December 2014

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