Social Security is a key part of retirement income for many Americans, but claiming it can be tricky and might reduce your monthly checks. Knowing the right strategies can help you get the most out of your benefits and have a more stable future.
This guide will help you avoid mistakes with eligibility, claiming strategies, and financial planning for Social Security, making sure you get the most from this important benefit.
Key Takeaways
Claiming Social Security benefits at the right time and using strategic planning can help maximize monthly checks and ensure a stable future.
- Delaying Social Security benefits until age 70 can result in significantly higher monthly checks, with an example of $2,277 more per month compared to starting at age 62.
- Spousal and survivor benefits can greatly improve household income for married, divorced, or widowed individuals by coordinating when they claim their benefits.
- Strategic financial planning, such as working until age 35 and increasing earnings during those years, can also boost Social Security benefits.
When to claim Social Security
The age you choose to start claiming Social Security greatly affects your retirement money. Many people start at age 62, but this can mean getting less money in the long run. Claiming early might be tempting, but it leads to smaller checks for life.
In 2025, the difference in monthly checks between starting at age 62 and starting at age 70 is big. Those who claim at 70 could get $2,277 more every month than those who start at 62. This adds up to $27,324 more each year. So, deciding when to start can really change your retirement plans.
But waiting isn’t right for everyone. Your health, financial needs, and life expectancy matter too. If you have health issues or expect a shorter life, claiming early might be better, even with smaller checks. It’s important to think about your situation and maybe talk to a financial advisor to find the best time to start.
Think about how long you expect to live. Many people guess their life span based on their parents’ age, but that might not be accurate. If you’re in your 60s, average life expectancy tables could mislead you since they factor in those who passed away young. Figuring out your break-even age can help you decide when to start claiming benefits.
Spousal and survivor benefits
For married, divorced, and widowed individuals, understanding spousal and survivor benefits can greatly improve your household income. Couples can use different strategies to maximize their Social Security benefits by coordinating when they claim them.
One helpful strategy is for the lower-earning spouse to start getting benefits at 62, while the higher-earning spouse waits until age 70. This way, you receive some benefits early and still maximize the higher-earning spouse’s benefits. When the higher earner reaches Full Retirement Age or 70, the lower-earner can switch to a spousal benefit if it’s higher. Spousal benefits can be up to 50% of the higher earner’s FRA benefit, but they don’t increase after FRA, even if the primary earner waits until 70.
Widows and widowers have special options to improve their benefits. A surviving spouse can first claim the survivor benefit and let their own retirement benefit grow until 70, then switch to the higher amount. This plan can greatly increase income for widows and widowers, especially if their own benefit is higher.
Divorced spouses might not know they can claim benefits based on their ex-spouse’s earnings. If you were married for at least ten years and are not remarried, you can claim up to 50% of your ex-spouse’s FRA benefit, even if they haven’t started claiming yet. Knowing these details can help divorced retirees avoid missing out on benefits and improve their financial stability.
Strategic financial planning
Social Security benefits are based on your highest 35 years of earnings. If you haven’t worked for 35 years, zeros are used in your average, which lowers your benefits. To avoid this, try working until you have 35 years of income, even if it’s part-time or lower-paying. Every extra year replaces a zero, boosting your benefits.
Besides having 35 years of earnings, increasing your salary during those years can raise your Social Security benefits. Since benefits depends on your highest earnings, getting promotions, side jobs, or negotiating pay can increase what you receive monthly. But, there is a cap on how much can be taxed for Social Security, which is $168,600 in 2024 and $176,100 in 2025. Earnings above this cap don’t add to your benefit.
When you decide to start claiming greatly affects your benefits. Many people don’t know how important the age is when claiming. Work history, earnings, and when you claim all play a role in your maximum benefit.
To get the highest payout, you need to work at least 35 years, earn at or above the maximum for those years, and delay benefits until age 70. Few people meet all these criteria, but understanding these can help you make smarter choices for better future income.
A strategy often missed is suspending benefits after claiming. If you’ve reached your full retirement age, you can pause payments to let them grow until age 70. This can help if your financial needs change. Also, if you claim early but regret it, you have a 12-month window to withdraw your claim and pay back what’s received, resetting your benefits for a larger future payout.
Coordination with other retirement income
Planning your Social Security with other retirement money can help you maximize your benefits. If you have extra income like pensions or retirement accounts, you might want to wait to take Social Security. This can lead to bigger benefits later. By using other savings first, you let your Social Security grow, giving you more steady money as you age.
Earnings test and tax implications
If you decide to start Social Security benefits while you’re still working, it’s crucial to know about the earnings test and possible tax effects. If you’re under full retirement age and make more than the limit, your benefits might be temporarily cut back. In 2024, if you earn more than $21,240, for every $2 you earn above that, $1 will be withheld from your benefits. Once you hit FRA, the limit goes away, and your benefits will be adjusted for what was previously withheld.
Your Social Security benefits could also be taxed based on your total income. Up to 85% of your benefits might be taxable if your total income is over certain levels. Understanding these guidelines helps you plan your income better and reduce possible tax costs.
The importance of cost-of-living adjustments
Each year, the Social Security Administration announces a cost-of-living adjustment to help benefits keep up with inflation. In October, they announced a 2.5% COLA, which will increase benefits for retirees and others next year. COLA is important because it helps keep the buying power of Social Security benefits strong. Retirees should think about these changes when planning their income for the future.
Final thoughts
Getting the most out of Social Security benefits means being smart about when to claim, using spousal benefits wisely, and planning your finances well. The choices you make on these can affect how much you get each month and your financial security in retirement.
By learning the rules and using good strategies, you can avoid mistakes and make the most of Social Security. It’s a good idea to have a financial advisor to plan your situation wisely, helping you have a secure and comfortable retirement.
