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15 Ways to Make the Most of Your Social Security

By Christy Bieber - Oct 9, 2022 at 8:00AM
A Social Security card.

15 Ways to Make the Most of Your Social Security

Maximizing your Social Security benefits is worth the effort

As a retiree, you won't be getting a paycheck, so you'll need to support yourself via other means.

Your Social Security benefits are likely going to be one of your most important methods of support since these checks are guaranteed for life.

Since you'll probably rely on these benefits throughout your senior years, it's worth learning how to make the most of them. These 15 tips can help you do just that, so you can have more of the funds you'll need to enjoy this later phase of life.

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1. Earn enough work credits to qualify for retirement benefits

Each year when you work and earn above a certain threshold, you can earn up to four Social Security work credits. You will need at least 40 credits to qualify for retirement benefits. This means you must work for at least 10 years.

If you don't do this, you won't be entitled to your own retirement benefits. You may still be able to claim spousal or survivor benefits, but eligibility for those depends on your marital status.

ALSO READ: Everything You Need to Know About Social Security Benefits

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2. Aim to increase earnings throughout your career

Your Social Security benefits will be based on average wages. Specifically, your benefits equal a percentage of the average amount you made during your 35 highest-earning years (after wages are adjusted for inflation).

Since this is how benefits are calculated, obviously the more you earn over your career, the higher your Social Security income will be.

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Office workers surround retiree at retirement party.

3. Work for at least 35 years

Your Social Security benefits are based on average earnings over 35 years -- but what happens if you don't work for a full 35 years?

You can still qualify for benefits but the formula used to determine them will still base your average wages on a 35-year career history.

You'll end up with a lower average benefit because some of the years included in your calculation will have $0 in wages.

ALSO READ: If You Haven't Met This Milestone, You Probably Shouldn't Claim Social Security

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4. Consider working longer if your salary has increased

If you have moved up the corporate ladder and increased earnings, you could be making much more late in life than you did earlier on -- even after adjusting for inflation.

If you want to raise the average wage your benefits are based on, you can do that by working a few extra years at your higher salary.

Since only 35 total years are included in your benefits calculation, each higher-earning year will replace a lower one, thus raising your average wage and your monthly Social Security check.

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5. Know your full retirement age

The benefit that the Social Security Administration calculates based on average wages is called your primary insurance amount (PIA). If you want to receive your PIA, you must get your first Social Security check at a designated age called your full retirement age, or FRA.

FRA is based on when you were born. Here's yours, based on your birth year:

  • Age 67 if you were born in 1960 or later
  • Age 66 and 10 months if you were born in 1959
  • Age 66 and 8 months if you were born in 1958
  • Age 66 and 6 months if you were born in 1957
  • Age 66 and 4 months if you were born in 1956

If you claim benefits at any other time, you will see either higher or lower checks rather than getting your PIA.

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6. Understand how an early (or late) claim impacts your benefits

Since claiming Social Security at a time other than FRA can increase or shrink benefits, you need to understand how your check amount will be affected based on when you claim it relative to full retirement age.

A claim ahead of FRA results in early filing penalties that reduce payments by 5/9 of 1% per month for each of the first 36 months. These penalties also reduce benefits further by 5/12 of 1% per month for each prior month you get a payment.

A claim after FRA results in delayed retirement credits that increase benefits by 2/3 of 1% per month of delay up until age 70.

ALSO READ: Want to Claim Social Security Early? Know These 2 Things First.

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7. Calculate your break-even point

If you're thinking about delaying a Social Security claim beyond the earliest eligibility age of 62, you're going to miss out on some checks that you could have had.

The goal is for future higher payments to allow you to at least break even for missed income and ideally end up with more lifetime Social Security benefits.

You'll want to see how many years of higher payments you'll need to break even. To do this, calculate how much income you will miss by delaying, and divide that number by the difference between the higher and lower monthly checks that would come at different ages.

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A gold key atop a Social Security card.

8. Understand all the benefits you could claim

Many people focus on retirement benefits, but these are not the only Social Security checks you could get.

If you become disabled later in your career, you may be better off claiming Social Security Disability benefits temporarily rather than retiring early and starting Social Security ahead of schedule.

If you are married or widowed, you could also potentially benefit from Social Security spousal or survivors benefits. And if you're a low-income senior, Supplemental Security Income could give you more money to live on.

ALSO READ: Social Security Disability: Everything You Need to Know

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9. Coordinate with your spouse

Married couples should always devise a Social Security claiming strategy designed to maximize lifetime benefits.

For example, sometimes it's best for lower earners to bring in some money by claiming their retirement benefits first and enabling the higher-earning spouse to delay getting checks to increase them.

When the higher earner finally claims Social Security, this will open up the door for spousal benefits, which could provide more income to the lower earner. And the higher benefit earned by waiting will also transfer to a larger survivors benefit as well.

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10. Know the rules for survivors and spousal benefits after divorce

If you are divorced, it's especially important you understand the rules for spousal and survivors benefits in order to make the most of your Social Security.

You can still receive these if you were married at least 10 years before your divorce, and you may get more money from them depending on your earnings relative to your ex partner's.

I Can't Believe This $17,166 Social Security Bonus Was So Easy Uncover a handful of little-known "Social Security secrets"... including a simple process that removes the guesswork and makes it easy to earn as much as $17,166 in additional benefits every year. Click here to get access to information on how you can uncover this lucrative strategy and even more insider information you won't want to miss.

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A check to the IRS for All my money.

11. Take steps to avoid federal taxes on benefits

Federal taxes can be charged on Social Security once countable income goes above $25,000 for single tax filers or $32,000 for married joint filers. Countable income is all taxable plus some nontaxable income, as well as half of Social Security benefits.

If you don't want to owe these taxes, investing in a Roth rather than a traditional retirement account throughout your career could be advisable. Roth distributions aren't taxable and aren't part of your countable income.

ALSO READ: Will You Be Taxed on Your Social Security Income? Here's How to Find Out.

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Map of the United States.

12. Be strategic about where you retire

A small minority of U.S. states impose taxes on Social Security benefits. This means if you live in one, there's a risk of losing some of your checks to your state government, as well as the IRS.

If you don't want to have to worry about paying state taxes, steer clear of the 12 locations where this could be a potential issue.

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13. Choose an area with a low cost of living

Even if you take steps to increase your Social Security checks, they will still only replace about 40% of pre-retirement income and won't give you a lot to live on.

If you want to make the most of them, consider choosing a retirement location where the cost of living is low. This way, your benefits will cover more of your day-to-day expenses.

ALSO READ: The Best States to Retire, Based on What People Really Want

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14. Know the rules for working as a retiree

If you haven't reached full retirement age and want to collect benefits and work at the same time, you need to understand the rules. Otherwise, you could forfeit some Social Security checks once your income exceeds a certain threshold.

Working while collecting benefits and causing some of your payments to disappear may be a bad thing in the short run, but it can increase benefits later. If you end up regretting an early Social Security claim, this is one approach that could be helpful.

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Medicare written on a Post-it note on a pile of hundred dollar bills.

15. Shop carefully for Medicare coverage

Finally, most people have Medicare premiums taken right from their Social Security checks. And most seniors spend a good portion of their Social Security on healthcare costs.

If you want to make the most of your Social Security, shop carefully for the right plan during Medicare open enrollment and try to take steps to protect your health so you can avoid having to pay for lots of expensive medical services.

I Can't Believe This $17,166 Social Security Bonus Was So Easy Uncover a handful of little-known "Social Security secrets"... including a simple process that removes the guesswork and makes it easy to earn as much as $17,166 in additional benefits every year. Click here to get access to information on how you can uncover this lucrative strategy and even more insider information you won't want to miss.

Previous

Next

Two people on a sailboat.

Make Social Security work for you

Making Social Security work as well as possible for you can go a long way toward providing for your financial needs.

You absolutely need supplementary income and shouldn't try to live on retirement benefits alone -- but it's still worth making them stretch as far as you can as these benefits are undeniably a crucial support source.

The Motley Fool has a disclosure policy.

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