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3 Social Security Secrets for Even Bigger Checks

By Maurie Backman - Jun 2, 2021 at 4:36AM

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Here's how you can score a much higher payday from Social Security.

You may end up relying on Social Security pretty heavily in retirement -- especially if you kick off your senior years with a lower savings balance than you'd like. If you want to score the highest possible paycheck from Social Security, here are a few moves you can make.

1. Save for retirement in the right account

What does the retirement plan you choose have to do with the Social Security benefit you collect as a senior? A lot, actually.

Once your income exceeds a certain threshold, you'll risk paying taxes on your Social Security benefits, and retirement-plan withdrawals count toward your income -- that is, unless you house your savings in a Roth IRA. If you go the Roth IRA route, any money you remove from that account will be yours to enjoy tax-free and won't count as income for Social Security tax purposes.

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2. Move to a state that lets you keep your benefits in full

Housing your retirement savings in a Roth IRA might keep the federal government away from your Social Security benefits, but what about your local government? Some states impose their own tax on Social Security, so knowing which ones to avoid could result in a higher monthly paycheck for you.

There are 13 states that tax Social Security:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. North Dakota
  10. Rhode Island
  11. Utah
  12. Vermont
  13. West Virginia

That said, Nebraska recently advanced a bill to phaseout Social Security taxes, so if you're thinking of retiring there, keep tabs on that situation to see how it plays out. Also, keep in mind that while the above states might tax Social Security, they may offer other benefits, like a low cost of living, that make them a worthwhile place to call home in retirement.

3. Undo your filing if you claim benefits too early

You're allowed to sign up for Social Security starting at age 62, but you're not entitled to your full monthly benefit, based on your wage history, until you reach full retirement age (FRA). FRA is either 66, 67, or somewhere in between -- it hinges on your year of birth. If you file for benefits ahead of FRA, you'll slash them for life -- unless you take advantage of the do-over option.

The Social Security Administration (SSA) will allow you to have one do-over in your lifetime if you claim benefits at the wrong time and want a second chance. To take advantage of this option, you'll need to withdraw your benefit application and repay the SSA all of the money in benefits it paid you within a year.

If you can pull that off, you can file again at a later point in time, thereby snagging a higher benefit in the process. This especially holds true if you decide to delay your filing past FRA -- for each year you do, your benefits will grow by 8%, up until you turn 70.

Unlike your retirement savings, which could get depleted in your lifetime, Social Security is guaranteed to pay you a monthly benefit for life. Take these steps to help ensure that that benefit is as high as it can possibly be.

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