By Wesley Howard Triani
Social Security is a crucial part of retirement planning. For many retirees, it serves as the foundation of their income. Yet, I’ve seen too many people make costly mistakes when claiming their benefits simply because they didn’t know the best strategies. Maximizing your Social Security benefits isn’t just about when you claim—it’s about making informed choices that align with your overall financial plan.
With over 43 years of experience in financial planning, I’ve helped countless individuals navigate the complexities of Social Security. Here’s how you can optimize your benefits and ensure a more secure retirement.
Understanding Your Social Security Benefits
Before diving into strategies, it’s important to understand how Social Security benefits are calculated. The amount you receive is based on three key factors:
- Your earnings history: The Social Security Administration (SSA) calculates your benefits using your 35 highest-earning years. If you haven’t worked for 35 years, those missing years will count as zeroes, which can lower your benefit amount.
- Your full retirement age (FRA): FRA is the age when you can receive your full Social Security benefit. For those born between 1943 and 1954, it’s 66. For those born in 1960 or later, it’s 67.
- When you start collecting: Claiming benefits early (as early as 62) reduces your monthly payments permanently, while delaying benefits beyond FRA increases them by about 8% per year up to age 70.
Now that you understand how benefits are determined, let’s explore some smart strategies for maximizing your Social Security income.
1. Delay Claiming Benefits if Possible
One of the most effective ways to maximize your Social Security income is to delay claiming until age 70 if you can afford to. Each year you delay beyond FRA, your monthly benefit increases. This strategy is especially valuable if you expect to live a long life or if you have other sources of income to rely on in the early years of retirement.
However, this may not be the best option for everyone. If you have health concerns or need income earlier, claiming sooner might make more sense. The key is balancing your personal financial needs with the potential long-term benefits.
2. Work at Least 35 Years
Since your Social Security benefit is based on your highest 35 years of earnings, working a few extra years can help replace lower-earning years and increase your benefit amount. If you had years with little or no earnings earlier in life, continuing to work can make a big difference.
Even part-time work can be beneficial. If you’re considering retirement but still enjoy working, staying employed for a few more years may pay off in the long run.
3. Coordinate Benefits with Your Spouse
If you’re married, coordinating your Social Security benefits with your spouse can maximize your total household income. Some strategies include:
- Higher-earning spouse delays benefits: The spouse with the higher earnings record can delay benefits to increase the survivor benefit for the lower-earning spouse.
- Claiming spousal benefits: A lower-earning spouse can claim up to 50% of the higher earner’s benefit at FRA. This can be a great way to maximize income while delaying one spouse’s benefits for a higher payout later.
- Survivor benefits: If one spouse passes away, the surviving spouse can receive the higher of the two benefits. This is another reason why delaying the higher-earning spouse’s benefits can be beneficial.
4. Be Aware of the Earnings Limit if Claiming Early
If you claim Social Security before your FRA and continue working, your benefits may be temporarily reduced if you earn above a certain limit. In 2024, for example, earning more than $22,320 before FRA results in a reduction of $1 for every $2 earned above that limit.
Once you reach FRA, however, there’s no penalty for working while receiving Social Security. If you plan to work and claim early, factor in how this earnings test could impact your benefits.
5. Consider Taxes on Your Benefits
Many people don’t realize that Social Security benefits can be taxed if your income exceeds certain thresholds. If your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) is above:
- $25,000 for single filers or $32,000 for married couples, up to 50% of your benefits may be taxable.
- $34,000 for single filers or $44,000 for married couples, up to 85% of your benefits may be taxable.
To minimize taxes, work with a CPA or financial planner to develop a strategy that blends Social Security with other tax-efficient income sources like Roth IRAs or tax-advantaged accounts.
6. Plan for Inflation Adjustments
Social Security benefits include cost-of-living adjustments (COLAs), which help maintain your purchasing power as inflation rises. While COLAs provide some protection, it’s still important to account for inflation in your overall retirement plan.
Relying solely on Social Security is risky. Having a diversified portfolio that includes investments, pensions, and savings ensures you can keep up with rising costs in retirement.
7. Review and Correct Your Earnings Record
Your Social Security benefits are based on your earnings record, so it’s essential to review your Social Security statement regularly to ensure accuracy. If there are errors in your reported earnings, your benefit calculation could be affected.
You can check your earnings record by creating an account on the Social Security Administration’s website (ssa.gov) and reviewing your annual statement. If you find any discrepancies, report them to the SSA as soon as possible.
Final Thoughts
Maximizing your Social Security benefits requires careful planning and strategic decision-making. By understanding how benefits are calculated, delaying when possible, coordinating with your spouse, and considering tax implications, you can make the most of this essential retirement income source.
But Social Security is just one piece of the puzzle. A well-rounded retirement plan includes multiple income streams, estate planning, and risk management. That’s why I always recommend working with a financial planner, a financial advisor, CPA, and an elder law or estate planning attorney to ensure all aspects of your financial future are covered.
If you haven’t reviewed your Social Security strategy yet, now is the time. A few smart decisions today can mean thousands of dollars more in retirement income for years to come.
Your future self will thank you.