Retirement approaches, and you are struggling to figure out how to make the most of your Social Security benefits. The rules are hard to decipher and the Social Security Administration does not generally give case-specific advice. We cannot decipher Social Security in a few hundred words — not even the Social Security Administration can do that — but we can offer the following helpful secrets to maximize your Social Security benefits.
- Time Your Filing Appropriately – You have the option of drawing benefits as early as age 62 or as late as seventy. Most advisors suggest delaying filing for benefits until age seventy, because your monthly benefits will increase by 8% annually for every year you wait past your full retirement age (FRA). Conversely, filing early will decrease your monthly benefits by up to 30%.
- Your expected lifespan is the key to your choice. If you file early, you will get less in each check — but you will be receiving checks for more years. Delaying only works if you live long enough and can afford to wait to draw your benefits. Also, delaying only increases benefits on your own record, not spousal or survivor benefits.
- Change Your Mind (Once) – If you decide you have made the wrong choice in filing for benefits, you have a one-time opportunity to change your mind within the first twelve months of receiving benefits. However, you will have to repay any benefits you and your family received, as well as any amounts withheld from your benefits for payments like Medicare premiums.
- Hold Off On Divorce – Had enough after nine years of marriage? Hang on for at least one more year to improve your benefit options. You can still file for spousal benefits on an ex-spouse's income history if you were married for at least ten years.
- Spousal vs. Widow/Widower Benefits – Widow/widower benefits have one big advantage over spousal benefits — widows/widowers can start drawing benefits on their own earnings history and switch to survivor's benefits later, or use the reverse order and draw survivor's benefits first and draw on their own history later, even when the widow/widower files before his or her FRA.
- Work at Least 35 Years – The calculation of benefits is quite complex, although online calculators are available to help you estimate your own Social Security benefits. The key is to have at least 35 years of work experience prior to retirement. Social Security is based on the highest-earning 35 years of your career. If you only worked 33 years, two zeroes will be included in your benefit calculations — so hanging on for a few extra years can disproportionately increase your benefits.
- Keep in mind that your early earning years are indexed for annual changes in average wages, so a seemingly lower salary twenty or thirty years ago may be comparable with your current salary in adjusted terms.
- Seek SSDI Representation – Any watcher of daytime TV will find many ads for lawyers offering help for Social Security Disability Insurance (SSDI) cases. Should you become disabled, it is wise to seek legal representation at the time of your initial application. The process is not always straightforward and an initial denial can take significant time to reverse.
We offer one final piece of advice that is not a secret: it is very difficult to retire comfortably on Social Security benefits alone. Maximize your benefits to the extent that you can, but make sure that you save separately for your retirement as well. Social Security is a lot less stressful when you can consider it as supplementary income.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing you.