How savvy do you think you are about Social Security? A survey by the folks at Financial Engines found that about three quarters of retired and nearly retired Americans felt somewhat or very confident about their Social Security savviness -- yet most of them scored a C, D, or F on an eight-question quiz about it.
Here's a question for you: Are you assuming that there isn't much you can do to affect how much you'll collect in Social Security benefits? If so, you're wrong. Much of the calculation is out of your hands, but there are still smart moves you can make that can boost your ultimate monthly benefit check or that can maximize the total amount you receive in benefits throughout your retirement. Here are a few smart moves to consider:
Be smart about when to start collecting
First off, don't assume that you'll just start collecting Social Security when you retire or when you reach your "full" retirement age (per the Social Security Administration). You can make your monthly checks much bigger by delaying starting to collect -- and you can start collecting early, too, if you're willing to accept smaller checks. By thinking strategically, you can make the most of your payouts. (By the way, the average Social Security retirement benefit was recently $1,338 per month, or about $16,000 per year.)
If your parents were born in 1937 or earlier, your full retirement age is 65, while it's 67 for those born in 1960 and later, and somewhere in between for those born between 1937 and 1960. You can choose to start collecting your checks as early as age 62, though, or as late as age 70. If you can afford to put off starting to collect you can make your eventual benefits bigger by about 8% for every year you delay between your full retirement age and 70. Thus, you can end up with payments about 24% bigger by delaying for three years. Still, remember that to get that, you gave up getting lots of smaller payments over the preceding years.
Of course, many people can't put off starting to collect too long, as they simply need the money. That's not the end of the world, though. The Social Security Administration has noted that on average, if you have an average lifespan, it's close to a wash, whether you start collecting early or late. It's not a wash if you live an exceptionally long life, though – in that case, having waited will be worth it. Developing an idea in 2016 of when you might start collecting is smart, as it can inform other decisions you make this year and in years to come.
Be smart about spousal strategies
If you're married, it's smart to take your spouse's benefits into account when planning, and to formulate a joint strategy together. This can be especially important if there's a great disparity in the earnings history of the two partners or perhaps if there's a great difference in ages.
For example, if two spouses are collecting benefits and one dies, the surviving spouse can collect the higher of the two benefit amounts. Thus, it can be smart for at least one spouse -- ideally the one who has been the bigger earner -- to delay collecting benefits in order to increase the size of their eventual checks. This can be especially valuable if one spouse earned a lot less in his or her working life than the other.
Meanwhile, many spouses are eligible for a spousal benefit, which can be as much as 50% of their partner's benefit. If you qualify for a spousal benefit, you can collect it while delaying starting your own benefits -- in order to let those grow. If you're divorced from someone you were married to for at least 10 years, you may be able to receive benefits based on your former spouse's earnings. Keep spousal strategies in mind as you plan now for how you're going to deal with Social Security soon or down the road.
Be smart about your big picture
Finally, spend a little time thinking of how much you expect to collect from Social Security and how that fits into your overall retirement plan. If you don't have a retirement plan... develop one! You might, for example, determine that you'll need an income of about $50,000 in retirement and estimate that you'll collect $22,000 annually from Social Security. If so, you need to have a plan for making up that $28,000 shortfall -- through investments, annuities, pensions, or some other means. (By the way, the overall maximum monthly Social Security benefit for those retiring at their full retirement age was $2,663 in 2015 -- or about $32,000 for the whole year.)
Be smart about Social Security, and you can make the most of it. Consider consulting a financial planning pro for advice, too, as they might end up saving you much more than they charge you.