If you have focused all your retirement planning energy on your 401(k) account, you may be missing a key piece of the puzzle: Social Security.
You can influence your eventual payout from this old-age safety net to a surprising degree by making some adjustments, or by making changes in retirement planning.
The time to get started pumping up your Social Security checks is now, even if you’ve got decades to go before retirement. Following are some of the best ways to do just that.
1. Raise your income
Because the amount of your Social Security checks is based partly on your earnings, doing what you can now to grow your income will fatten your Social Security checks in the future.
Some ways to boost your income:
- Focus on regular raises. Assess your value at work and approach your employer thoughtfully.
- Consider changing jobs if your salary has topped out in your current job.
- Plan for professional growth, including evaluating whether more schooling would be worth the cost or whether you should enter a new line of work.
2. Avoid claiming benefits too early
The age at which you start collecting Social Security makes a big difference in the size of your checks.
You generally can start claiming benefits as early as age 62. But your benefit checks will be smaller if you claim any time before you reach what the Social Security Administration calls your “full retirement age.”
For example, if you start receiving benefits immediately, at age 62, your checks will be forever 20% to 30% smaller than if you had waited until you reached your full retirement age. Here are “7 Reasons Not to Take Social Security at Age 62.”
Some people have no choice, though. Many retirees stop working earlier than planned because of illness or unemployment, or to be caregivers for a family member, for example. If this is the case for you, try using other sources of income if possible, so that you can hold off claiming benefits until you’re older.
On the other hand, if you don’t expect to live to a very old age, it may be a good idea to claim that money now. It depends on your circumstances. Here are “5 Times When It’s Smart to Claim Social Security Early.”
3. Hold on until age 70
Just as claiming Social Security before your full retirement age can lead to a smaller check, delaying claiming until after reaching full retirement age can lead to a bigger monthly check.
The Social Security Administration gives these examples to illustrate the value of waiting:
- “67, you’ll get 108% of the monthly benefit because you delayed getting benefits for 12 months.
- 70, you’ll get 132% of the monthly benefit because you delayed getting benefits for 48 months.”
After age 70, you’ve maxed out the value of waiting as there are no further increases to be had. Don’t hold off claiming benefits beyond your 70th birthday.
4. Get professional help
In many instances, an informed decision about when to claim which Social Security benefits can boost benefits by tens of thousands of dollars over your lifetime, especially for couples.
Various companies will prepare a customized analysis revealing exactly when to claim Social Security benefits to receive the maximum lifetime payout.
Social Security Choices sells one such product for $39.99 and, in partnership with Money Talks News, offers a $10 discount. Use coupon code “moneytalks” when buying a report. To learn more, stop by our Solutions Center, and read “A Simple Way to Maximize Your Social Security.”
5. Look into spousal benefits
Married people have an advantage in the Social Security system. A married person may be able to receive up to half the amount of his or her spouse’s full retirement benefit. Even a spouse who never worked may be able to claim benefits.
A divorced person who was married 10 years or longer may also qualify for spousal benefits, if they have not remarried and meet other requirements.
6. Pump up the survivor’s benefits for your spouse
When you die, your Social Security benefits end, but your widow or widower may be eligible to receive survivor’s benefits on your Social Security record.
The amount of survivor’s benefits that your spouse would be eligible to receive depends in part on your earnings history. So, do all you can now to increase your earnings.
7. Weigh the cost of working while claiming benefits
If you claim Social Security benefits before reaching full retirement age and also work, it can cost you. The government could reduce your Social Security checks by as much as $1 for every $2 in earnings over a certain amount, up until you reach full retirement age.
The amount you are dinged, however, eventually will be paid back to you, the SSA says. When you reach full retirement age, your monthly benefit will increase to account for the withheld benefits. You just have to live without it for the period during which you are still working but have yet to reach full retirement age.
We explain this in detail in “The Danger of Working While Collecting Social Security.”
8. Pay off debts
Social Security checks can be garnished for certain debts and other financial obligations. These can include:
- Child support
- Overdue federal taxes
- Federal student loans
If possible, pay these off before retirement so you can keep your entire benefit check.
9. Check for errors
Monitor your Social Security statements, looking them over to ensure your income is reported correctly. Getting credit for every penny you’ve earned will boost your eventual benefit checks.
You can do this all online by creating an account at SSA.gov.
Also, creating an account is the best way to guard your Social Security from thieves.
10. Collect benefits for minor children
Once you start collecting Social Security benefits, your unmarried dependent children may be eligible for benefits also.
The definition of “children” here can include biological and adopted children, stepchildren and dependent grandchildren, depending on the child’s age and other circumstances.
11. Work more years
The size of your Social Security benefit checks is generally decided by a formula that is effectively based on your 35 highest-earning years of work. If you work for fewer than 35 years, the formula uses zeros for the missing years’ earnings.
Years of zero earnings will lower your benefits. So, work at least 35 years before you stop working.
12. Watch out for taxes
If your only income in retirement will be from Social Security, you probably won’t have to worry about paying income taxes. But if you have income from other sources, up to 85% of your Social Security benefits may be taxable.
Federal taxes on Social Security benefits are based on your tax filing status and, if you are married, on what the SSA calls your “combined income.”
Some ways of reducing your federal income tax bill in retirement might be to choose investments that would lower your tax liability or reduce your spending to draw less income from your retirement savings each year.