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8 Ways to Enhance Social Security Benefits
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8 Strategies to Enhance Social Security Benefits
The delay of your start date is a way to guarantee the best monthly benefit -- but there are other options worth considering.
By Liz Weston, CFP(r) Senior Writer | Personal finance economics, credit scores, and personal finance Liz Weston, CFP(r) is a personal financial columnist, host of"Smart Money," the "Smart money" podcast an award-winning journalist, and the creator of five novels on finances, which includes the bestselling "Your credit score." Liz has been on numerous national radio and television shows such as the "Today" program "NBC Nightly News," The "Dr. Phil" show, as well as "All All Things Considered." Her columns are published in the media by The Associated Press and appear in hundreds of media outlets every week. Prior to NerdWallet, she wrote for MSN, Reuters, AARP The Magazine and the Los Angeles Times. She lives in Los Angeles with a husband, a daughter and a golden retriever who is a co-dependent.
Dec 21, 2022
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Understanding how to boost Social Security benefits is important, since those checks will likely provide a significant portion of your income in retirement.
Unfortunately, many people don't understand the way Social Security really works. They make claims too early, fail to claim on important benefits and don't take advantage of strategies that could increase their lifetime income. The consequences of their mistakes could be as much as $250,000, according to research.
Here are eight ways to increase your Social Security benefits.
In this article and Show More
1. Refrain from submitting your application
Social Security retirement benefits rise by roughly 5-7% each year that you delay between the earliest claiming age, 62, and your retirement age at full retirement at 2 months and 66, and increasing to 67 for those born in 1960 and later.
The benefit you receive will increase if you are able to wait beyond your retirement age. Increase your payout by 8% for each year that you delay applying until you reach age 70, at which point your benefits are at their maximum.
Pro tip: The majority of people prefer to delay their application due to the large body of research that takes into account longer life spans as well as the current interest rates , and benefits for survivors. Many financial planners encourage their clients to tap other sources of income, for instance retirement funds, if that lets them put off applying.
2. Work longer
Social Security is calculated based on the worker's highest-earning 35 years. You could be eligible to increase your benefits by working longer if you'll earn enough to replace one of your lower-paid years with one that is more lucrative.
People who took time off to raise families or otherwise had breaks in their employment might find that working for longer hours to help increase their benefits. (Note it is important to note that should you begin Social Security early, continuing to work could temporarily reduce your benefit.) In addition, a woman's salary is more likely is higher than that of a male as they age, increasing the possibility of getting paid if you continue to work.
Pro Tip: If you apply for Social Security early, your benefit will be reduced by $1 for every $2 you earn in excess of the limit. This is $21,240 in 2023. This earnings test disappears at the time you reach your full retirement age It's recommended to wait until you reach this age to start applying.
3. Earn more
Another method to boost the size of your Social Security check is to max out your earnings as many years as you can. "Maxing out" in 2023 means that you've earned more than $160,200, which is the maximum amount of income subject to the 6.2% Social Security payroll tax. If you've maxed out in all 35 of your most lucrative years, you'll be eligible for the highest Social Security benefit at your full retirement age. That's $3,627 a month in 2023.
Pro tip: Sometimes self-employed people will try to minimize the amount of their income subject to payroll taxes, but that maneuver can come back to bite them when the time comes to apply to Social Security. Making a little more tax in the short run may pay off in an ongoing stream of more and inflation-adjusted earnings.
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4. Consider your spouse
Couples who earn less could receive greater benefits from taking benefits for spousal support than using their own retirement benefits. Spousal benefits can be as much as 50 percent of what the highest earner receives at his or his full retirement age. The amount is discounted in the event that it is initiated early. In general, the spouse who earns the most to be receiving an annual retirement income for the other spouse to receive a spousal benefit. Prior to this, those with higher earnings were able to "file and suspend" to increase their own earnings but it's not an option.
If you make an application, Social Security will compare the spousal benefits against your own retirement benefits and give you the larger of both. Most of the time you will not be able to switch from benefits from a spouse to your own benefit in the future regardless of whether your own benefit would be higher. (People born before the date of. 2 1954, are given the option of filing the "restricted request" for spousal benefits only, and then changing to their own benefit later.)
Couples should also think about survivor benefits in they make Social Security decisions. If one spouse dies, the survivor is entitled to only one check -- which is the largest of the two checks the couple received. The drop in income from the check that's lost can be substantial. Couples can help mitigate the harm by making sure that the check that remains is as big as it can be. This usually means having the one with the highest income delay the date of Social Security typically for at least a few years until full retirement age.
A tip for you: Coordinating benefits with a spouse can become complicated. Consider using an Social Security claiming calculator to explore the options. You can find a free version on the AARP site, or you can buy more sophisticated version at Social Security Solutions ($20 and up) or Maximize My Social Security ($39 and up).
5. Investigate divorced spouse benefits
If you're currently unmarried but a previous marriage lasted at least 10 years, then you could qualify for spousal benefits in accordance with your ex's job history. The amount can be up to 50 percent of the employee's benefits at his or her full retirement age. If you decide to remarry the divorced spouse benefit is canceled. You must be 62 to get spouse benefits.
If your ex has died and your marriage lasted at least 10 years, then you could qualify for survivor benefits that can be as high as 100% of the ex's benefits. You may remarry at age 60 or over (or 50 or more if disabled) and still be eligible for benefits from divorced survivors. Benefits for survivors and divorced survivors start at the age of 60, or 50 if the survivor's disabled, or at any age when you're taking care of your ex's child who is less than 16 or is disabled (and in that case the requirement for marriage of 10 years is removed). Survivors may switch to their own benefit later , if the amount is greater, and vice versa.
Pro tip: Your ex must be at least 62 for you to be eligible for divorced spousal benefit. However, the spouse does not need to receive his or his own benefits. (That's distinct than regular benefits to spousal, that typically will require the main worker to submit prior to the spouse is eligible to receive any benefits.) Survivor benefits are based on the amount your ex received or could have earned when they reached full retirement age. (If you and your spouse delayed claiming benefits after reaching full retirement age, your survivor's benefit will be enhanced by the delay retirement credit.) If you start benefits before the age of full retirement however, the amount you get will be cut in half.
6. Add your minor child
If you're currently receiving Social Security retirement or disability benefits, your children could be eligible for an additional check. An unmarried minor child can get up to 50 percent of the primary worker's retirement or disability benefit. This child benefit typically ends at 18, but can be extended to 19 in the case of a child who is attending high school. Benefits for children are available for those who are 18 or older if they are disabled and their disability started prior to the age of 22.
There is an "family maximum" that limits how much a family can collect on the basis of one worker's earnings record. The maximum is between 150% and 188% of the worker's monthly salary at full retirement age. If the total benefits for your family exceed the limit and the worker continues to receive a regular check but checks for dependents would be proportionately reduced.
Pro tip: Family benefits, including the benefits for spouses and children can be subject to the Social Security earnings tests and can be reduced or removed if the primary worker receives benefits earlier however, they continue to work.
7. Suspend your benefit
If you began Social Security early and decided it was a mistake, you may be able to stop receiving your benefits at the time you reach . This will enable your benefit to accrue credits for delayed retirement that increases the amount you are eligible for by 8% every year until you reach 70, at which point your benefit reaches its maximum. There is no obligation to pay back the benefits you've earned.
In addition, if you stop your benefits, it, also suspends the benefit of those who are receiving checks based on your work history, such as spouses or minor child. The potential increase in your benefit might not cover the loss of benefits for your dependents.
Pro tip: Sometimes Social Security workers incorrectly tell people they cannot stop benefits. If this happens to you then refer them to this page on the website.
8. Do it again
If you change your mind within a year after applying to Social Security, you can make a withdrawal and pay back the amount you've earned in benefits. This will reset the clock for your benefits so that you can receive the 7% to 8% annual increase by delay in your application. This can only be done once per lifetime and you aren't allowed to withdraw your application after 12 months.
Pro tip: Removing your application is not the same as suspending your benefit. You may suspend your benefits either in writing or verbally at any time after reaching full retirement age. To withdraw, you must fill out the Social Security Form SSA-521 in the first one year after applying and pay an amount equivalent to the total amount of benefits your family and you have received, which includes any Medicare premiums that are deducted from your paychecks.
Author bio Liz Weston is a columnist at NerdWallet. She is a certified financial planner and author of five money books including "Your Credit Score."
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