Summary: If you have ever wondered how to maximize social security benefits, you are not alone. This is is one of the most frequent questions I receive from individuals who are planning their retirement. (See: How to plan for retirement in your 50s) With proper planning, you may be able to substantially increase your lifetime benefit from the social security administration.
Here are 5 ways to maximize social security benefits:
1. Work for 35 years. Social security calculates benefits based on your highest 35 years of earnings. If you have not worked 35 years, zeros are included in the calculations for every year you did not work up to 35 years. Also, many individuals receive their highest earnings later in life. Working a few extra years could maximize your social security benefits. If you are interest in a quick calculation checkout this Social Security Calculator.
2. Work until your full retirement age. If you have planned well, living off your savings until your full social security retirement age can definitely maximize social security benefits for you or your spouse. For example, if your full retirement age is 67, you’ll receive about 30 percent less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent–you won’t be eligible for a benefit increase once you reach full retirement age. Working until your full retirement age will maximize social security benefits.
3. Delay claiming social security until age 70. For each year you delay taking social security benefits after full retirement, your payment will increase by 8% up until age 70. So if you have a nest egg on the side that can provide temporary income, waiting to take social security is a surefire way to maximize social security benefits.
4. Claim 50% of your spouse’s payments. The social security administration allows you to claim your own lifetime benefits or 50% of your spouse’s benefits, whichever is greater. This is especially great for spouses who may have exited from the workforce to raise their family, thereby generating a lower lifetime average income.
5. File and suspend social security payments. When individuals file and suspend, they are telling the Social Security Administration that they want to file for the sole purpose of triggering benefits for their lower earning spouses but that they want to defer collecting their own retirement benefits until they are worth more later.
Creating the largest possible benefit for the biggest earner also ensures that the surviving spouse will receive the largest survivor benefit. This can help improve the likelihood of never running out of money. Keep in mind, that although file and suspend can be a great way to maximize social security benefits, it can be complex. Always consult with your financial advisor before implementing.
The best way to maximize your social security benefits is to work with a financial planner who understands your particular situation. The best financial planners have advanced software which allows them to run multiple scenarios for your situation. This has the potential to save you hundreds of thousands of dollars over a lifetime. You can also learn more about how to maximize your social security benefits at the social security administration.
5 Ways to Maximize Social Security Benefits was written by Katherine Fonville, President of Fonville Wealth Management, LLC., a Registered Investment Advisory firm located in Richmond, Va. She is a fee-only financial planner and investment advisor helping successful individuals and families with comprehensive wealth management needs.
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