Maximize Your Social Security Benefits

Show Notes

• Most people don’t save enough to live on their retirement investments alone and depend heavily on Social Security. Retirees are far more dependent today on a system that was only designed to provide 40% of retirement income. One reason for that is due to the changing landscape of retirement over the years.
• In 1935 when the program was introduced, pensions were common and provided guaranteed retirement income for as long as you lived.
• One reason employers no longer provide pensions is that the average lifespan of Americans has increased considerably over the years. In 1935, it was around 60 years. Today, it’s more like 79 years.
• The result is that Americans now need many more years of retirement income.
• Most workers are bound to the Social Security system and that means you need to make the most of your potential Social Security benefits. We say potential because the decisions you make can raise or lower those benefits.
• HOW TO MAXIMIZE YOUR SOCIAL SECURITY BENEFITS
• There are actually many things you can do. Some of them are fairly complex and only apply to certain people. But here are five that everyone should be able to do.
• 1. Make sure you work a full 35 years. That’s because the Social Security Administration uses your highest 35 years of earnings to determine your level of benefits. Any years less than 35 count as zeros and lower your benefits.
• If you work more than 35 years, each additional year of higher earnings replaces one of lower earnings, and the net result is a higher monthly benefit.
• 2. Work more as you near retirement. After age 60 your earnings count more and they have a greater, positive impact on your benefits.
• Sometimes people scale back work as they near retirement, but that can lower your benefits. So if possible, work more hours after age 60 until you retire, not fewer.
• 3. Delay benefits until you reach at least your full retirement age. For most people working today is 66 or 67.
• Every year that you delay benefits beyond your full retirement age increases your benefits by about 8%. And every year after age 62 that you elect to receive benefits—but before your full retirement age—will cost you 8% in benefits.
• Let’s say you’re eligible to receive $2000 a month at age 66. By waiting until age 70 to receive benefits … that monthly amount would increase to $2,640. That’s a 32-percent gain.
• 4. For married couples: Delay your benefits while claiming those of your spouse. If you and your spouse both work and have reached full retirement age, claim spousal benefits, but let the benefits based on your own work record continue to grow until you reach age 70.
• 5. Watch out for taxes on your Social Security benefits. If you continue to work after you begin receiving benefits, anywhere from 50 to 85 percent of those benefits could be counted as taxable income.
• The IRS uses a fairly complicated formula to determine what percentage of your Social Security income is taxable, but in simple terms, the more you can spread out income from other sources, the better off you’ll be.
• It’s also a good idea to consult with a financial advisor on the best ways to minimize your tax liability during retirement. A Certified Kingdom Advisor can help you do that.
• So, those are some things you can do to maximize your Social Security benefits, but remember, Social Security is a very poor substitute for investing as much as you can in a qualified retirement plan like a 401k or IRA.

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