Social Security remains one of the most reliable income sources for retirees, so it’s important to consider strategies that help make the most of it.
Making smart choices around timing, spousal benefits and work history can significantly increase monthly payouts and lifetime benefits.
However, Social Security rules can be complex, and people often misunderstand the nuances of claiming.
Here are 10 strategies to maximize your Social Security income throughout your retirement.
Work 35 Years or More
Social Security benefits are based on a worker’s highest 35 years of earnings. That means you don’t have to worry that low wages from your part-time high school job decades ago will put a dent in your benefit.
However, workers do need 40 credits, accumulated at the rate of four per year for 10 years, to be eligible for a benefit.
According to the Social Security Administration, “If you do not have 35 years of earnings by the time you apply for retirement benefits, your benefit amount will be lower than it would be if you worked 35 years. Years without work count as zeros in the benefit calculation.”
[READ: What Is the Maximum Possible Social Security Benefit in 2024?]
Earn a Higher Salary
Social Security uses the 35 highest earning years to determine your benefit; the more you earn, the higher your benefit.
However, that amount is capped at $168,600 in 2024 and increases to a cap of $176,100 in 2025. That means a worker can’t get a higher monthly benefit for income above that level.
“Increasing your income can greatly increase your future Social Security payout because it is determined by your past earnings,” said Steven Kibbel, certified financial planner at Kibbel Financial Planning in Nashville, Tennessee, in an email.
“In the highest 35 years of work that Social Security uses to calculate benefits, higher lifetime earnings translate into greater money,” he added. “To increase your reported income, take advantage of chances such as pay discussions, promotions or even side gigs.”
Don’t Claim Before Your Social Security Full Retirement Age
For people who haven’t claimed their benefit, the full retirement age is 66, plus a certain number of months, for people born before 1960. For anyone born in 1960 or later, the FRA is 67.
Taking the benefit before your FRA means accepting a lower amount.
“Claiming Social Security at the wrong age may reduce your benefit by 57%,” said Colby Van Sickler, founder and CEO of F3 Wealth Management in Arlington, Texas, in an email.
For example, he said, if a person’s FRA is 66 and the monthly benefit is $2,000, taking Social Security at age 62 will reduce their lifetime monthly benefit by 25% to $1,500.
“Conversely, if you delay taking your benefits to age 70, you will increase your lifetime Social Security by 132% to $2,640,” he said. “Each year that you wait to take your Social Security up to age 70, your payment increases by 8%.”
[Related:Reasons to Take Social Security Early at Age 62]
Estimate Your Longevity
How long you expect to live should factor into your calculation of when to take your benefit.
Many people make the mistake of looking at their parents’ longevity, which in many cases can result in underestimating their longevity. It’s also a mistake to look at tables showing average life expectancies, which include people who died as children or young adults. Those tables can be irrelevant for people already in their 60s.
Calculations, such as determining your break-even age, can help determine the optimal age to take Social Security, as can an analysis of projected income and expenses in retirement.
“One of the most valuable services we provide our retired clients is performing the type of analysis needed to project the amount of income a portfolio can generate and then extrapolate that projection into the future to allow for various potential scenarios,” said Jim Davis, a certified financial planner at Aspen Wealth Management in Fort Worth, Texas, in an email.
[Related:Should Retirees Still Plan for 95?]
Consider Delaying Social Security Until Age 70
If you have other sources of income, such as a pension, investments or a job, you may want to put off taking your benefit until you are 70.
“You can obtain delayed retirement credits, which raise your monthly payment by 8% annually after FRA if you wait until you are 70 years old to begin receiving benefits,” said Kibbel. “This can maximize your lifetime monthly income and result in a benefit that is up to 32% greater than if you were to claim at FRA.”
This delay, he added, may result in much larger lifetime benefits for people with longer life expectancies.
That includes people who are healthy, don’t engage in risky pursuits such as race-car driving or parachuting, and who have a favorable family health history.
Suspend Your Social Security Payments
This is a little-known strategy you can use if you change your mind after claiming a benefit. For example, say you start Social Security but decide to keep working, which allows you to amass more credits and a higher benefit later.
This strategy is only available if you’ve already reached your FRA. In that case, you can suspend the benefit. It will automatically restart once you turn 70. You can also request to have the benefit restarted at any time.
Pay Back Your Social Security Benefit
If your full FRA is 67 but you decide to take your benefit at age 63, you’ll be taking a reduced benefit for life.
If you realize you don’t need the money after all or decide to continue working, you may choose to stop receiving your benefit, but it has to happen within 12 months of your claiming date. You’ll have to pay back all benefits you’ve received, but you’re setting yourself up for a higher benefit later.
Use a Social Security Spousal Benefits Strategy
Married couples can take advantage of a specific way to maximize the household benefit.
For example, the split retirement benefit strategy means the lower-earning spouse takes their own retirement benefit at 62; then the higher-earning spouse waits until 67 to file.
At that time, the lower-earning spouse can switch to the spousal benefit if it’s higher than their own.
“It’s important to note that even if the higher-earning spouse files at age 70, the spousal benefit stops growing at 67,” said Kevin Walton, a Social Security coach at C2 Financial Corporation in Thousand Oaks, California, in an email.
This strategy means the lower earner can receive up to half the higher earner’s FRA benefit. “Only the higher-earning spouse gets the age 67 to 70 delayed retirement credits,” Walton said.
For divorced spousal benefits, he added, the higher-earning ex-spouse doesn’t have to be drawing benefits for the lower earner to draw on the former spouse’s earnings record.
“I see some lower-earning ex-spouses losing benefits, thinking they have to wait until the ex starts claiming benefits,” Walton said.
Maximize Social Security Survivor Benefits
Widows and widowers can still take advantage of a restricted benefit previously available to all married spouses before 2016.
This provision allows widowed people to restrict their application to either the survivor benefit or their retirement benefit and take the remaining benefit later.
“For example, at 62, you may want to claim the survivor benefit while allowing your own retirement benefit to continue to grow, and at age 70, you switch to your now larger retirement benefit,” said Dana Anspach, a certified financial planner and CEO of Sensible Money in Scottsdale, Arizona, in an email.
“The claiming strategy that will work best for you will depend on your age, earning history and the amount of benefits available,” she added. “Running an analysis is crucial to ensuring you don’t inadvertently cheat yourself out of thousands of dollars.”
Claim Social Security Survivor Benefits for Children
There are a few circumstances in which a person under age 18 is eligible for benefits. Those include situations in which a parent is deceased or disabled or retired.
These benefits stop once the recipient reaches age 18 unless they are a student or have a disability. A child can receive up to half the parent’s full retirement or disability benefits.
“If a child receives survivor benefits, they can get up to 75% of the deceased parent’s basic Social Security benefit,” according to the SSA. However, there is a maximum family benefit based on the parent’s full benefit amount. Families should consult the SSA to determine the family amount they are entitled to.
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10 Strategies to Maximize Social Security originally appeared on usnews.com
Update 10/30/24: This story was published at an earlier date and has been updated with new information.
