Maximizing your Social Security benefits is a great way to plan for your retirement financially. You can get the maximum benefit by claiming your benefits at full retirement age or choosing to delay receiving them until you are 70. You can limit income tax by keeping your retirement income in check. You may even be eligible for additional benefit choices, so you should check with Social Security to make sure you are receiving the maximum benefit available.
Claim at Full Retirement Age
Once you reach full retirement age, you are eligible for your full benefit. This is critical for many household budgets because claiming your benefits when you are first eligible at age 62 means a reduction of 30%. If you wait to claim your Social Security benefits until you reach age 67, you will be able to receive your full benefits.
The full retirement age is a number decided on by Social Security. If you were born in 1960 or later, your full retirement age is 67. That is the time you should aim for when planning to claim your benefits.
Delay Until Age 70
For every year past your full retirement age that you wait to claim your benefits, your benefit increases by around 8%, up until age 70. This could lead to a substantial increase in your monthly income, which would add up to great effect over time.
Many individuals with limited incomes may find themselves needing to accept their benefits sooner, which makes sense for their financial situation. If you are in a position and are healthy, waiting to receive your benefits until you reach age 70 could be a boon for your bottom line. You can speak with a financial advisor for a personalized look at how delaying your benefits could help your situation.
Limit your Post-Retirement Income
Your income, once you are in retirement, can make a big difference in the income taxes you owe, and how much of your benefits will be counted toward your income.
If you will be reaching your full retirement age in 2021, you will receive full retirement benefits for any months you are fully retired, without any income restrictions affecting your benefit. Full retirement is judged based on how much income you bring in during the months when you are fully retired. Many people who are about to retire will have earnings higher than the limit, which would have meant a higher income tax. The special rule for the year you reach full retirement is meant to protect you regardless of your income.
Once you are past full retirement age, you will receive your full benefits. You will also have higher limits on earnings before your benefits start to count toward your income taxes.
Social Security will not tell you if you are eligible for more benefits. You have to advocate for yourself by checking with the administration to see what other benefits you could be eligible for.
For example, there are spousal and divorcee benefits that you may be eligible for which could exceed the benefits you would normally apply for based on your own earned income. These benefits mean you would be eligible for half of their monthly benefits. If your partners earned significantly more than you did, this amount may be higher than your full earned benefit.
You can only receive one benefit, but by checking that you are receiving the benefit that you are eligible for with the highest amount, you could bring in significantly more over your lifetime, which would help your monthly budget.