Social Security is a government program that provides retirement, disability, and survivor benefits to eligible individuals. It serves as a vital source of income for retirees, providing financial security in their later years. However, many individuals may not be aware of the various strategies they can use to maximize their Social Security benefits.
In this article, we will discuss the top strategies to optimize your Social Security benefits for your retirement income.
Delay Claiming Your Benefits
One of the simplest ways to increase your Social Security benefits is by delaying your claim. The longer you wait to claim, the higher your monthly benefit amount will be. For each year you delay from your full retirement age (FRA), which is typically between 66 and 67, your benefit will increase by about 8%. This means that if you wait until the maximum age of 70, you could receive up to 32% more in benefits.
Maximize Your Earnings
Another way to maximize your Social Security benefits is by increasing your earnings. Since Social Security benefits are based on your highest 35 years of earnings, earning more in those years can significantly boost your monthly benefit amount. To increase your earnings, you could negotiate for a higher salary, take on side jobs or investments, or even consider delaying retirement to continue earning income.
Coordinate Spousal Benefits
If you are married, you and your spouse can coordinate your Social Security benefits to receive the maximum amount. This can be done by strategizing when each of you should claim their benefits. For example, one spouse could delay claiming until they reach age 70 while the other claims at their FRA. This way, you both can receive higher benefit amounts while still having some income during the waiting period.
Utilize Restricted Application
If you were born before January 2, 1954, you may be able to take advantage of the restricted application strategy. This allows you to claim spousal benefits while delaying your own until a later age. By doing this, you can receive some income from your spouse’s benefits while letting yours grow until they reach their maximum amount.
Take Advantage of Survivor Benefits
Survivor benefits can be a valuable source of income for high-net-worth individuals. When the first of a couple dies, the survivor keeps the higher of the two benefits. Factoring in your spouse’s life expectancy, and not just your own, should be considered when strategizing your Social Security benefits.
Understand the Earnings Limit
If you choose to continue working while receiving Social Security benefits, you should be aware of the earnings limit. This is the maximum amount you can earn before your benefits are reduced. For those who have not reached their full retirement age, there is a $1 reduction in benefits for every $2 earned above the limit. However, once you reach your FRA, there is no longer an earnings limit, and you can continue working without any reduction in benefits.
Take a Lump Sum Payment
In certain situations, it may be beneficial to take a lump sum payment of Social Security benefits instead of receiving monthly payments. This is only available to those who were born before January 2, 1954 and have reached their FRA. By taking a lump sum payment, you can receive up to six months’ worth of benefits in one payment. While this may seem like a large sum upfront, it could potentially be more beneficial in the long run.
Consult with a Financial Advisor
Consulting with a financial advisor who specializes in retirement planning can help you understand your options and develop a personalized strategy that suits your specific needs and goals.
Start planning early and make the most out of your Social Security benefits! At Kreitler Financial, we work with business owners to help them achieve their financial and retirement goals. We are proud to work with clients who have achieved a great level of success and who are committed to long-term relationships.
Let our experienced advisors guide you toward success! Start your journey today!