6 Tips for Getting the Most out of Your Social Security Benefit

6 Tips for Getting the Most out of Your Social Security Benefit

One of the most problematic myths about retirement is that people can live on Social Security benefits alone. The amount of money that each person receives is different, but even on the higher end of the spectrum, the payment is typically not enough to make ends meet for households.

At the same time, it makes sense to maximize one’s payments as much as possible. Too many people do not fully understand how Social Security works, which puts them at a disadvantage. Some of the important tips to keep in mind when it comes to getting the most from Social Security include:

1. Understand the role of your work history.

The Social Security benefit that someone ends up receiving is based largely on work history and specifically on average monthly wage. The federal government considers a person’s 35 most profitable years when making this calculation. While these years do not have to be consecutive, people who do not work at least 35 years will have $0 factored into the benefits equation for each year missed.


For that reason, people may need to extend their working time a bit before retiring, especially if they have only worked for 33 or 34 years. Even people that have worked 35 may want to continue working if they earn considerably more now than they did earlier in their careers. This will bring the average up as much as possible and increase the ultimate payment.

2. Know your full retirement age.

People should not assume that full retirement age is the same for everyone. In reality, this age is based on the year that someone was born. Knowing one’s own full retirement age is critical since that is when individuals can start collecting their full benefit.

Individuals can file prior to full retirement age, but their Social Security benefit will be cut as a result. The option to file begins at 62. However, benefits are decreased by 6.67 percent for each year early for the first three years and then by 5.0 percent each year after that.

People born 1954 or before reach full retirement age at 66. Full retirement age gradually increases until 1960, at which point full retirement age is 67. For those born in 1960, claiming benefits at 62 results in a 30 percent reduction in benefits. While this may not make a big difference for people with a shorter life expectancy, it can really hurt people who live for decades in retirement.

3. Delay taking your benefits if possible.

The other side of the full retirement age coin is the fact that people can get a boost to their benefit when they delay retirement. For each year past full retirement age that people wait to start claiming Social Security benefits, they get an 8-percent boost, at least up until the age of 70.

This increase is permanent, so it can really benefit people in the long run. Delaying is particularly important for people who have not saved much outside of Social Security. It is the easiest way to get a significant boost to the payment and maximize income during retirement.

4. Consider spousal benefits.

When people die, their spouses become eligible to receive their monthly Social Security payment as a survivor benefit if it is currently higher than their own monthly payment. This fact can influence how couples strategize their individual benefits.

married couple

This fact gives weight to the argument that people should delay benefits until age 70 whenever possible. The higher payment may also benefit a spouse down the line. However, couples may choose to start drawing on one person’s benefit early in order to delay the benefit for the higher earner, which will maximize that payment.

That way, both individuals benefit from the higher payment without needing to struggle to make ends meet until the higher earner turns 70. Of course, waiting for both parties to turn 70 maximizes the joint benefit received.

5. Take back a claiming decision.

People who are within the first 12 months of claiming their Social Security benefit can actually withdraw their application for benefits. When this happens, that person is forced to repay anything that the federal government has sent, but the record then becomes as if benefits were never received at all.

This rule is important for people who apply for benefits at an early age without understanding the ramifications. It gives them a chance to reverse the decision so that they can maximize their benefit. Also, individuals should know that they can get a tax refund or credit for any taxes that they might have paid on the benefits they received during that time period.

6. Suspend your benefits if you can.

Once individuals have reached full retirement age, they have the option of voluntarily suspending their Social Security benefit. The reason to consider this is that the suspension helps boost future benefits and keeps individuals from needing to repay the benefits they have already received.

The benefit increase from suspending benefits is 0.67 percent per month, which adds up to 8 percent per year. Someone who mistakenly claims early but has passed the 12-month withdrawal mark can suspend benefits from age 66 to 70 for a 32-percent increase in benefits, which is quite substantial.