How to Maximize Social Security Benefits

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 15, 2024

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Social Security is a social insurance program run by the U.S. government intended to provide benefits to eligible individuals at retirement or in the event of disability. These payments also act as a financial safety net for the family members of these individuals upon their death.

The program ensures they can have income at retirement or during other challenging life circumstances. It helps protect individuals from economic hardships. The funds can be used to cover necessities like clothing, food, as well as health expenses.

When creating a retirement plan, most individuals look to Social Security benefits to supplement their income. Additionally, Social Security provides an assurance of financial security against unexpected costs or situations associated with aging.

Understanding available Social Security options is essential when considering how to maximize the benefits one will receive in retirement. There are some strategies available to maximize Social Security benefits.

Work for at Least 35 Years

To receive the full Social Security benefit, working at least 35 years is recommended. Social Security benefits depend on an individual's average indexed monthly earnings over their highest 35 years of inflation-adjusted earnings.

For example, when an individual has only worked for 30 years, their retirement benefit will be calculated based on their average indexed monthly earnings from throughout those three decades, which can result in a lower monthly benefit.

The Social Security benefit depends on how much they earn during their highest-earning years. The amount increases with more earnings, but there are limits. For 2024, the maximum benefit is $2,710 if they retire at 62, $3,822 if at 66 (full retirement age), and $4,873 if they retire at 70.

Work Until Full Retirement Age

Social Security benefits can be claimed as early as age 62, but monthly payments are permanently reduced if an individual chooses to receive payments before their full retirement age. The full retirement age is 66 for individuals born between 1943 and 1954.

For those born between 1955 to 1959, the full retirement age gradually increases in two-month increments, with age 67 being the full retirement age for those born in 1960 or later. Claiming benefits before reaching the full retirement age will result in a reduction of up to 30%.

Deciding between claiming earlier for a lower benefit amount and waiting for a higher amount depends on an individual's unique circumstances, including their retirement plans and financial resources. Claiming earlier can provide a steady income but at a lower value.

Postpone Receiving Benefits Until 70

Postponing the receipt of Social Security benefits until age 70 can be a smart financial strategy. The benefits are based on the age at which they are claimed, and waiting until age 70 can result in a significantly higher monthly benefit amount compared to claiming earlier.

If individuals delay signing up for Social Security from age 62 until their full retirement age, they will receive a return of approximately 5% to 7% per year until they reach age 70, at which point, the benefit will be maxed out and further delayed retirement credits of 8% per year will be given.

Claiming benefits at age 62, with a full retirement age of 67, results in a reduction of 30% compared to claiming at full retirement age. Conversely, waiting until age 70 to claim benefits leads to a payment increase compared to claiming at full retirement age.

Increase Earnings

The amount of Social Security benefits an individual receives is directly proportional to their earnings history. Boosting income through salary increases, additional sources of income, working longer, or seeking higher-paying jobs will increase a person’s Social Security payments.

However, there is an annual limit on the amount of earnings that are subject to Social Security taxation and considered for benefits calculation. In 2024, earnings up to $168,600 are taken into account. Any earnings exceeding this amount will not affect future Social Security payments.

Utilize Spousal Benefits

Social Security spousal benefits provide financial support to an individual who is 62 years old or taking care of a child under the age of 16 and married to a worker who can receive Social Security retirement or disability benefits.

Spousal benefits are equal to half of their partner's benefit. Even those who are divorced are eligible, but remarried individuals cannot take advantage of the benefits based on their former spouse's earnings.

Reduce Social Security Taxes

Social Security benefits may be subject to federal income tax, and the taxation of these benefits depends on a recipient's total income. Social Security benefits may be taxed if a recipient's combined income is above a certain threshold.

To reduce the amount of tax, individuals can consider strategies such as deferring Social Security benefits, reducing taxable income through retirement accounts, maximizing deductions and credits, and also consider using tax-free investments, such as municipal bonds.

Maximize Survivor Benefits

Survivor benefits can help replace the lost retirement income and can significantly impact the overall retirement income of a surviving spouse. The surviving spouse can receive the full benefit amount the deceased worker was eligible to receive.

A surviving spouse has the option of starting to take survivor benefits from the Social Security program beginning at the age of 60. However, claiming before reaching full retirement age will result in a reduced benefit.

The benefit amount can be increased by waiting to claim Social Security until age 70. The widow or widower may also be eligible for a higher survivor benefit if the deceased spouse had a higher Social Security payment.

Verify Accuracy of Records to Avoid Errors

It is crucial to verify the accuracy of one's Social Security records, as errors can significantly impact the benefits received. Inaccuracies in these records can result in incorrect benefit calculations, leading to either lower or higher benefits than one is entitled to receive.

To avoid these errors, regularly review the records by accessing the Social Security Statement, which provides a summary of an individual's earnings history and estimated Social Security benefits.

Report any errors or discrepancies promptly to the Social Security Administration (SSA) to ensure that they are corrected promptly and confirm that the information is accurate and up-to-date to prevent any unexpected reductions.

How to Maximize Social Security Benefits

The Bottom Line

Social Security is a US government-run program that provides benefits to eligible individuals at retirement, disability, or death. The benefits act as a financial safety net and help protect individuals from economic hardships.

Understanding Social Security options is vital to maximizing benefits in retirement. Working at least 35 years is recommended to receive the full Social Security benefit. Delaying until full retirement age to claim benefits can also result in a higher monthly payment.

Postponing receipt even further until age 70 can result in a significantly higher benefit amount.

Boosting earnings while working will also increase Social Security payments. Receiving spousal and survivor benefits also raises the available income.

Reducing Social Security taxes also helps minimize expenses and maximize the benefit. Lastly, regularly verifying the accuracy of records is essential to avoid benefits being miscalculated and to ensure that individuals receive the full benefits to which they are entitled.

For more tips on how to maximize your Social Security benefits and other retirement planning concerns, consult with a financial advisor.

How to Maximize Social Security Benefits FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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