Social Security benefits are a crucial source of income for many retirees, yet most people don’t realize how much their choices can impact their benefits. Navigating the system can be complex, and failing to plan ahead could mean missing out on money that could make a big difference in retirement.
Understanding the factors that affect your benefits is essential for making the most of them. While the rules might seem overwhelming, a few key decisions can help ensure you receive the maximum amount to which you’re entitled.
Check for Errors in Your Earnings Record
Your Social Security payments are based on your reported earnings, so mistakes in your record can cost you money. Review your earnings statement annually through your online Social Security account. Fixing mistakes now ensures you get what you’re owed later.
Coordinate Benefits with Your Spouse
If you and your spouse are eligible for Social Security, planning your claiming strategy together can maximize your household income. One spouse might delay claiming to increase their benefit while the other collects earlier. Smart claiming strategies can add thousands of dollars to a couple’s lifetime benefits. Timing matters and a little planning goes a long way.
Work for at Least 35 Years
Social Security calculates your benefit using your 35 highest-earning years. If you work fewer than 35 years, the system fills in the missing years with zeros, dragging down your average. Even if you’re nearing retirement and have some low-earning years, working a little longer can help. Replacing a low-income year with a higher one will raise your benefit amount.
Delay Claiming Your Benefits
The longer you wait to collect Social Security (up to age 70), the more you’ll receive. Claiming at 62 means permanently reduced benefits, while waiting until your full retirement age (66-67) or later results in larger payments. According to the Social Security Administration, for every year you delay past your full retirement age, your benefit increases by about 8%. That means waiting until 70 could boost your checks by up to 32% compared to claiming at 66.
Take Advantage of Spousal Benefits
Married? Divorced after at least 10 years? You might qualify for spousal benefits worth up to 50% of your spouse’s benefit. This can be a great option if your benefit is lower. Even if your ex-spouse remarries, you can still claim these benefits if you don’t remarry yourself. It’s free money that too many people overlook.
Keep an Eye on Taxes
Social Security benefits can be taxed if your total income (including pensions, wages, and investments) exceeds a certain threshold. If you’re careless, you could lose a chunk of your monthly check to taxes. According to the IRS, up to 85% of your Social Security benefits could be taxable, depending on your income level. Smart tax planning—like withdrawing from retirement accounts strategically—can help you keep more of your benefits.
Consider Working While Collecting Benefits
If you claim Social Security before your full retirement age and keep working, your benefits could be temporarily reduced if your earnings exceed a specific limit. But once you reach full retirement age, those reductions disappear, and your benefit is recalculated.
The Social Security Administration states that in 2025, you can earn up to $23,400 before benefits are affected if you’re under full retirement age. After that, your benefits will increase to account for the deductions, so you don’t lose out in the long run.
Factor in Survivor Benefits
If your spouse passes away, you may be eligible for their full benefit instead of your own if it’s higher. This can be a financial lifesaver for widows and widowers. Understanding how survivor benefits work can help you decide when to claim your benefits.
Don’t Rely Solely on Social Security
While it’s essential to maximize your Social Security benefits, it shouldn’t be your only source of retirement income. On average, Social Security replaces about 40% of pre-retirement earnings, which may not be enough to cover all expenses. Financial advisors recommend supplementing your benefits with other income sources, like retirement savings, investments, or a part-time job. The more you plan, the better off you’ll be.
Earn More Money Before Retiring
Your benefit amount is based on how much you earned during your highest-paid years. You’ll see a difference in your future payments if you can increase your earnings before retirement—through a raise, side gig, or even switching jobs. Even a modest increase in lifetime earnings can lead to significantly higher Social Security benefits. The more you contribute to the system, the more you get back.
Disclaimer – The Finance Key does not provide and does not intend to provide financial, investment, tax, or legal advice. Information contained in this article is for informational and educational purposes only. This list is solely the author’s opinion based on research and publicly available information. The inclusion of links to third-party content is not an endorsement by The Finance Key of such content or services. Please do your due diligence and use your discretion.
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