Understanding Social Security Benefits – Maximizing Your Retirement Income

As retirement approaches, the decision of when to start claiming your Social Security benefits becomes paramount. The age at which you choose to elect benefits can significantly impact the amount you’ll receive throughout your retirement years. Let’s explore some key strategies to help you make informed choices and get the most out of your Social Security.

1. Timing is Everything: When to Elect Social Security

At age 62, you become eligible to claim Social Security benefits, but doing so will result in a reduced monthly amount. To receive your full benefit, you’ll need to wait until your Full Retirement Age (FRA), which varies based on your birth year. And if you can afford to wait even longer, delaying benefits until age 70 will increase your monthly benefit to its maximum.

2. Extend Your Working Years to Boost Benefits

The amount of Social Security benefits you receive is determined by your highest-earning 35 years. If you haven’t worked for at least 35 years, the missing years will be counted as zeros, lowering your overall benefit amount. Consider extending your working years to fill these gaps and make the most of your peak earning years, leading to higher benefits in retirement.

3. Tap into Spousal Benefits

Married individuals have the option to claim spousal benefits. At your Full Retirement Age, you can choose between your own benefit or 50% of your spouse’s benefit—whichever is higher. This can be especially advantageous if your spouse earned significantly more during their working years.

4. Leverage Benefits from Past Relationships

If you were married for at least ten years and haven’t remarried, you may be eligible to claim benefits based on your ex-spouse’s earnings record. To take advantage of this option, your benefits must be lower than what you would receive from your ex-spouse’s record, and you must be at least 62 years old.

5. Understand How Earnings Affect Benefits

Working while receiving Social Security benefits can lead to reduced benefits if you earn above the IRS income limit before reaching your Full Retirement Age. For every $2 earned above the limit, your benefit will decrease by $1. However, once you reach your FRA, your benefits will be recalculated to account for the reductions due to excess earnings.

6. Mindful Tax Planning

Keep in mind that a portion of your Social Security benefits might be subject to federal income taxes if you have substantial income from other sources in addition to your benefits. To minimize potential tax liabilities, monitor your provisional income and earnings limits and seek advice from a tax advisor.

By understanding these strategies and applying them wisely, you can optimize your Social Security benefits and pave the way for a more comfortable financial future during your retirement years. Make the most of what you’ve earned and enjoy your retirement to the fullest!

Remember, knowledge is power!

Corey Shevlin

Corey Shevlin

Corey serves as an investment adviser representative and handles the investment related administration for The Lynch Financial Group. He currently holds his Series 65, Life and Health Insurance licenses. He attended the University of Delaware and graduated with a Bachelor’s degree in Political Science and Criminal Justice in 2019.