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If you have focused all your retirement planning energy on your 401(k), 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 now or by making changes in your 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. Work more years
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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, at least work for 35 years before you stop working.
2. Raise your income
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Because the amount of your Social Security checks are based in part on your earnings, doing what you can do 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 the smart way.
- Consider changing jobs if your salary has topped out at 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.
3. Avoid claiming benefits too early
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The age at which you start collecting Social Security makes a big difference in the size of your checks.
You can start claiming benefits as early as age 62. But your benefits 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 right at age 62, your checks will be forever 20 to 30 percent smaller than if you had waited until you reached your full retirement age.
Some people have no choice. Many retirees stop working earlier than they planned because of illness or unemployment, or to be caregivers for a family member. If that is the case for you, try to use other sources of income if possible, so you can hold off claiming benefits until you’re older.
4. Hold on until age 70
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Delaying Social Security as long as possible is not for everyone. If you have reason to believe you won’t live long, perhaps you should collect early.
However, 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 check.
The value of waiting beyond full retirement age is obvious in this 2017 example from the SSA:
“If you retire at full retirement age in 2017, your maximum benefit would be $2,687. However, if you retire at age 62 in 2017, your maximum benefit would be $2,153. If you retire at age 70 in 2017, your maximum benefit would be $3,538.”
There’s no benefit, though, in waiting past age 70.
5. Get professional help
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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.
6. Look into spousal benefits
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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.
7. Pump up your spouse’s survivors benefits
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When you die, your Social Security benefits end, but your widow or widower may be eligible to receive survivors benefits on your Social Security record.
The amount of survivors 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.
8. Weigh the cost of working while claiming benefits
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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 come back to you, the SSA says.
Once 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.”
9. Watch out for taxes
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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, you can be taxed on up to 85 percent of your benefits.
Federal taxes on Social Security benefits are based on your tax filing status and what the SSA calls your “combined income.” Combined income comprises your adjusted gross income, half your Social Security benefits and any nontaxable interest.
So, you may be able to reduce your federal income tax bill in retirement, such as by choosing investments that would reduce your tax liability or by reducing your spending so you can drawn down less income from your retirement savings each year.
10. Pay off debts
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Social Security checks can be garnished for certain debts and other financial obligations, which can include:
- Child support
- Overdue federal taxes
- Non-tax debts owed to a federal agency
If possible, pay these off before retirement so you can keep your entire benefit check.
11. Check for errors
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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 if you create an SSA.gov account. Creating an account is also the best way to guard your Social Security from thieves.
12. Collect benefits for minor children
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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.
When do you expect to start collecting Social Security? Share with us in comments below or on our Facebook page.