As you approach retirement, the decisions you make about Social Security become increasingly important. The amount you have contributed to Social Security over your career influences your benefits, but you also have some control over when you start receiving those benefits.
If your financial situation allows, strategically timing your Social Security benefits can significantly impact your monthly checks. This article will look into traditional and alternative approaches to increasing your Social Security benefits beyond having other income sources or preparing an IRA or Roth IRA account.
Traditional Approach
The Social Security Administration (SSA) bases your retirement benefits on three main factors: your income during your working years, the Social Security taxes paid on that income, and the accumulation of credits. To qualify for retirement benefits, you need 40 credits, which can be accrued over at least ten years of work.
Once you have accumulated the necessary credits, the next crucial decision is when to start receiving your benefits. Ideally, waiting until the maximum retirement age of 70 years will provide the highest monthly benefit of $4,873. However, many Americans cannot delay benefits until age 70 and must start earlier. The earliest age to claim Social Security is 62, but doing so results in significantly reduced benefits—up to 44% less, with a maximum monthly benefit of $2,710.
Options for Increasing Benefits
If you decide to start receiving your Social Security benefits early but want to increase your monthly payments, there are two primary options available. Both require some financial planning and flexibility.
Reversing Your Claim
The first option is to reverse your decision to claim Social Security benefits. This can be done by submitting a withdrawal request within 12 months of starting benefits. However, this process requires you to repay all benefits received to date, including any Medicare premiums and taxes withheld.
Reversing your claim allows you to defer benefits and ultimately receive a higher monthly payment when you restart them. This option is feasible if you have the financial means to repay the SSA, but it is not suitable for everyone.
Suspending Payments
The second option is to request a temporary suspension of your Social Security payments. This strategy allows you to pause your benefits and let them grow, resuming at a later date for a higher monthly amount.
It is important to note that suspending benefits also affects anyone receiving benefits on your record, such as a spouse or children. Additionally, you will need to cover Medicare premiums out of pocket during the suspension period.
Financial Planning
Both strategies to increase your Social Security benefits involve careful financial planning. Here are a few considerations to keep in mind:
- Evaluate Your Financial Situation: Ensure you have enough savings or alternative income sources to cover your expenses during the suspension or repayment period.
- Consider Health and Longevity: Assess your health and expected lifespan to determine if delaying benefits is a viable option.
- Consult a Financial Advisor: A financial advisor can help you navigate these options and determine the best strategy based on your individual circumstances.
Maximizing your Social Security benefits requires strategic planning and an understanding of the various options available. Whether you choose to reverse your claim or suspend payments, the goal is to ensure you receive the highest possible monthly benefit to support your retirement.
By carefully evaluating your financial situation and consulting with professionals, you can make informed decisions that will benefit you in the long run.
FAQs
What is the maximum Social Security benefit at age 70?
The maximum benefit at age 70 is $4,873 per month.
Can I reverse my Social Security claim?
Yes, within 12 months of starting benefits, but you must repay all benefits received.
How does suspending Social Security benefits work?
You can pause benefits, allowing them to grow, and resume later for a higher monthly amount.
What happens to my family’s benefits if I suspend my Social Security?
Benefits for spouses or children on your record will also be suspended.
How much can I receive in Social Security at age 62?
At age 62, the maximum benefit is $2,710 per month.