Retirement is a major milestone, and it’s important to know how to maximize your Social Security benefits as you enter the later stages of life. Read on to explore some of the ways you can get the most out of your benefits and ensure financial peace of mind, even as your career winds down. 

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Understand Your Full Retirement Age (FRA) for Social Security Benefits

Your full retirement age (FRA) is the age at which you are entitled to receive 100% of your Social Security benefits. This age varies based on your birth year. For those born between 1943 and 1954, the FRA is 66. For those born in 1960 or later, the FRA is 67.

A Little Patience Goes a Long Way

While you may be tempted to start claiming benefits early, delaying your Social Security benefits past your FRA can significantly boost your monthly payouts. For example, if you are due to receive benefits starting at age 66 but delay until you’re 70, you’ll receive 132% of the total monthly benefit. 

Strategies for Maximizing Social Security Benefits

There are several ways you can maximize your Social Security benefits. These strategies require careful consideration and planning but can result in substantial financial gains over the course of your retirement.

Work for at Least 35 Years

Social Security benefits are calculated based on your highest 35 years of earnings. The Social Security Administration (SSA) takes your lifetime earnings, adjusts them for inflation, and uses the average of your top 35 earning years to calculate your primary insurance amount (PIA). This is the amount you will receive at your FRA.

Say you only worked 20 years. In that case, the SSA would add 10 zero-earnings years to your calculation, which drives down your average monthly earnings and, consequently, your benefits. Even if you’re nearing retirement age, working a few extra years can make a difference. 

Maximize Your Earnings

Since your benefits are calculated based on your earnings over time, it only makes sense that the more you earn over the course of your career, the higher your payouts in retirement. Each year, the SSA sets a maximum taxable earnings limit, which is the maximum amount of income subject to Social Security taxes. For 2024, this limit is $168,600.

Essentially, the more you earn up to this limit, the higher your benefits will be. As such, it’s really in your best interest to make the career moves now to maximize Social Security benefits later, whether that means investing in education, switching jobs, or otherwise.

Consider Spousal and Survivor Benefits

Social Security offers myriad options for spouses in terms of their own benefits and the ability to receive benefits based on their partner’s work history. Here’s what to know about spousal and survivor benefits:

  • Spousal Benefits: If your spouse earns more than you, you may be eligible to receive a spousal benefit, up to 50% of your spouse’s benefit at FRA. Spousal benefits are not reduced by your own earnings, so if your personal benefit is lower than half of your spouse’s, you will get paid the difference.
  • Survivor Benefits: If your spouse passes away, you can receive payments of up to 100% of their benefit. You can start receiving survivor benefits at 60 (or 50 if you’re disabled), but they will be reduced if claimed before your FRA. 

For couples, spousal and survivor benefits can significantly boost household retirement income. Lower-earning spouses can benefit from the other’s work record, which can be particularly advantageous for those who took time out of the workforce to raise children.

Coordinate with Other Retirement Income

Think of your Social Security benefits as one part of your overall retirement strategy. Consider the timing and tax implications of withdrawals from other retirement accounts, such as 401(k)s or IRAs, in relation to Social Security. 

Because Social Security benefits may be taxable if your income exceeds certain limits, you can benefit from delaying Social Security and drawing down tax-deferred accounts first, reducing your taxable income in the early years of retirement.

And it never hurts to diversify your income streams during retirement. While you may not be working full-time anymore, you can still make money on the side, whether through a personal business or part-time work. Try not to put all your eggs in one basket.

If you need some advice for coordinating your Social Security benefits with other retirement income, consider speaking to a financial advisor. They can help you develop a tailored plan for managing your income and avoid common financial mistakes in retirement. 

Do the Most With Your Social Security Benefits

Retirement can be a stressful time for many, but it doesn’t have to be. With proper planning and expert guidance, you can maximize your Social Security benefits and enjoy financial freedom. That way, you’ll have enough to meet your basic needs while also enjoying that trip abroad you’ve always dreamed about. Or that new luxury car. Or…you get the picture.

 

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