Social Security benefits are a significant income source for many retirees—and for some, they're the only source. How significant an income source it is, however, is determined by several factors that are under retirees' control.
If you're nearing retirement (or are already in retirement) and haven't yet collected Social Security benefits, make sure you fully understand the ins and outs before you fill out your application to receive money. Here are some top tips you can use to get the most out of your well-deserved Social Security benefits.
Delay Receiving Benefits
Delaying receiving benefits is the top and the most common way to maximize the money you receive. Generally, the longer you wait after you reach full retirement age (FRA), the more money you can get every month.
Full retirement age varies depending on when you were born and is defined by the Social Security Administration as "the age at which a person may first become entitled to full or unreduced retirement benefits."
If you were born between 1937 and 1954, your FRA is age 65 to age 65 and 10 months, depending on the exact year of birth. If you were born between 1943 and 1954, you FRA is 66. Birth years from 1955 to 1959 range from 66 and two months to 66 and 10 months. A person born in 1960 or later reaches FRA at 67.
While it's true that you'll receive more money from Social Security if you wait several years to receive benefits until after you reach full retirement age, it's also true that your benefits will be reduced if you choose to receive them before full retirement age.
"When to Start Receiving Retirement Benefits," a publication from the Social Security Administration, gives an example of someone who has a full retirement age at 66 with an assumed benefit of $1,000 per month. If they take their Social Security benefits early at age 62, their monthly benefit would go down to $750 per month. However, if they were to wait and take their Social Security benefits at age 70, their monthly benefit would go up to $1,320 per month.
Take Advantage of Marital Social Benefits
If you're married, there are still a few ways to further maximize your Social Security benefits with your spouse if you fit into some new and stringent deadlines. You can claim benefits based on your own earnings, or you can choose to receive up to 50% of the amount that your spouse receives. Keeping this in mind, there are a couple of strategies.
One strategy is to restrict an application. In this scenario, you might be the higher income earner, but you didn't make so much money that your spouse would be best off with spousal benefits. You might want, in this situation, for your spouse to claim Social Security benefits first. You can get the spousal benefit and allow your benefits to grow until you are age 70. Once you reach that age, you can apply for benefits. Your spouse can either continue taking their own benefit or take the spousal benefit if that is now higher.
Invest Your Benefits Check
While many retirees focus on how to get the most out of their Social Security benefits, don't forget to consider how you can actually invest the money you receive to make even more money.
Delaying Social Security benefits is a fantastic idea if you know that you're going to get an 8% return on your benefit. But what about once you receive the money? Should you spend it? Do you have to spend it? Perhaps not.
If you have a 401(k) or other retirement benefits from your working years, why not try to live off of those and invest your Social Security checks for the future? It's not a bad idea. In fact, it could save you from having to go back to work if you encounter a number of unexpected expenses during retirement.
Try this: Use a life expectancy calculator to get a rough idea of how much longer you'll live. If you're just now retiring, you might have another 20 years to cover with your income. Let this sink in – 20 years is a long time! A lot can happen between now and then, and you're going to want to be financially prepared.
If you can live on less money than you're bringing in, invest as many Social Security dollars you can into your future. Seek the help of a financial advisor who can walk you through the process of investing. A good financial advisor will put your money into conservative investments designed for your risk tolerance and goals.
The Bottom Line
Utilizing any or all of these three strategies will help you get the most out of your Social Security benefits and help you have a retirement without basic financial worries. Of course, you should consider enlisting a financial advisor to help walk you through these strategies and to recommend solid investing strategies.
If you're nearing retirement (or are already in retirement) and haven't yet collected Social Security benefits, make sure you fully understand the ins and outs before you fill out your application to receive money. Here are some top tips you can use to get the most out of your well-deserved Social Security benefits.
Delay Receiving Benefits
Delaying receiving benefits is the top and the most common way to maximize the money you receive. Generally, the longer you wait after you reach full retirement age (FRA), the more money you can get every month.
Full retirement age varies depending on when you were born and is defined by the Social Security Administration as "the age at which a person may first become entitled to full or unreduced retirement benefits."
If you were born between 1937 and 1954, your FRA is age 65 to age 65 and 10 months, depending on the exact year of birth. If you were born between 1943 and 1954, you FRA is 66. Birth years from 1955 to 1959 range from 66 and two months to 66 and 10 months. A person born in 1960 or later reaches FRA at 67.
While it's true that you'll receive more money from Social Security if you wait several years to receive benefits until after you reach full retirement age, it's also true that your benefits will be reduced if you choose to receive them before full retirement age.
"When to Start Receiving Retirement Benefits," a publication from the Social Security Administration, gives an example of someone who has a full retirement age at 66 with an assumed benefit of $1,000 per month. If they take their Social Security benefits early at age 62, their monthly benefit would go down to $750 per month. However, if they were to wait and take their Social Security benefits at age 70, their monthly benefit would go up to $1,320 per month.
Take Advantage of Marital Social Benefits
If you're married, there are still a few ways to further maximize your Social Security benefits with your spouse if you fit into some new and stringent deadlines. You can claim benefits based on your own earnings, or you can choose to receive up to 50% of the amount that your spouse receives. Keeping this in mind, there are a couple of strategies.
One strategy is to restrict an application. In this scenario, you might be the higher income earner, but you didn't make so much money that your spouse would be best off with spousal benefits. You might want, in this situation, for your spouse to claim Social Security benefits first. You can get the spousal benefit and allow your benefits to grow until you are age 70. Once you reach that age, you can apply for benefits. Your spouse can either continue taking their own benefit or take the spousal benefit if that is now higher.
Invest Your Benefits Check
While many retirees focus on how to get the most out of their Social Security benefits, don't forget to consider how you can actually invest the money you receive to make even more money.
Delaying Social Security benefits is a fantastic idea if you know that you're going to get an 8% return on your benefit. But what about once you receive the money? Should you spend it? Do you have to spend it? Perhaps not.
If you have a 401(k) or other retirement benefits from your working years, why not try to live off of those and invest your Social Security checks for the future? It's not a bad idea. In fact, it could save you from having to go back to work if you encounter a number of unexpected expenses during retirement.
Try this: Use a life expectancy calculator to get a rough idea of how much longer you'll live. If you're just now retiring, you might have another 20 years to cover with your income. Let this sink in – 20 years is a long time! A lot can happen between now and then, and you're going to want to be financially prepared.
If you can live on less money than you're bringing in, invest as many Social Security dollars you can into your future. Seek the help of a financial advisor who can walk you through the process of investing. A good financial advisor will put your money into conservative investments designed for your risk tolerance and goals.
The Bottom Line
Utilizing any or all of these three strategies will help you get the most out of your Social Security benefits and help you have a retirement without basic financial worries. Of course, you should consider enlisting a financial advisor to help walk you through these strategies and to recommend solid investing strategies.
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