If you’re nearing retirement, it’s an opportune moment to understand how to get the most out of your Social Security benefits. You might be surprised to learn about certain strategies that could increase your benefits, regardless of whether you live alone or have minor children at home. Here are six practical methods to maximize your retirement benefits.
While well-meaning, the Social Security Administration (SSA) representative you consult may not always provide accurate advice due to a heavy workload and potentially inadequate training. This misinformation could potentially cost you a significant amount during your retirement – as much as tens of thousands of dollars.
Reconsider Your Social Security Application
There is an opportunity to change a previous decision if you’re within the first 12 months of claiming and have sufficient funds. You can withdraw your application and return all the benefits you’ve received so far. “If you do this, it’s as if you never made the initial claim,” explains a retirement income certified professional and instructor at the American College of Financial Services.
“Many people claim Social Security without fully comprehending the implications,” he continues. “For instance, many choose to claim Social Security before reaching full retirement age, only to regret this decision later on.”
After returning the benefits you received, you can request a tax refund or credit for any taxes paid on these benefits.
Pause Your Social Security Benefits
Once you reach full retirement age, you can voluntarily pause your Social Security benefits. This will enhance your future benefits without the need to return any benefits you’ve already received. Prunier offers an example to illustrate why you might want to voluntarily suspend your benefits after reaching full retirement age.
Consider Chaman, who started receiving Social Security benefits at 63. Their full retirement age is 66, and their full monthly benefit is $1,000. Because they started receiving benefits 36 months early, their monthly benefit was reduced to $800. At 65, Chaman realizes they made a mistake starting their benefits early. But it’s been more than 12 months since they started, so they can’t withdraw their application.
Chaman still has options. They can choose to suspend their benefits at 66. For each month they suspend, they will earn delayed retirement credits worth two-thirds of 1% per month—or 8% per year. If they wait until 70 to restart their Social Security benefits, this strategy will increase their monthly benefit by two-thirds of 1% for 48 months, or 32%. Their former monthly benefit of $800 would increase to $1,056.
Enhance Your Household Benefits
If you have a spouse or minor children, it’s important to think about how your claiming strategy impacts them. This could mean adopting a different approach than you would to maximize your personal benefit payment.
Factors that can influence this decision include:
- The number of children in the household
- The time remaining until they turn 18 (or 19, if they’re full-time students)
- The size of your spouse’s benefit
- The age difference between the spouses (survivor benefits are permanently reduced if you claim early)
One commonly heard piece of advice is to delay claiming until age 70 if you can afford it. However, if you’re in your 60s and still have minor children at home, which is often the case in blended families, you might receive more benefits in the long run by claiming at a younger age to receive dependent benefits. The dependent child benefit equals half of the claiming parent’s full retirement benefit, even if the parent claims early. The younger spouse could also be eligible for a spousal benefit. These additional benefits might compensate for the lower benefit you receive by filing early.