Thursday, February 7, 2013

Maximize Your Social Security Benefits for an Easier Retirement

If you are dreaming of a more financially secure retirement, there are actions that even the average person can take to dramatically increase their Social Security benefits and make their retirement years much easier.

Many Retirees Earn Low Benefits

As mentioned before in this blog, the average American receives less than $1300 a month in benefits, according to Social Security Administration records.  In addition, approximately $104 a month will be deducted from that amount for those retirees who are also on Medicare.  In 2016, the Medicare deduction could increase to about $123 a month or more for many people, despite the fact that they will not receive an increase in Social Security benefits. 

The result of this is that many individuals will receive less than $1177 a month in benefits after Medicare is deducted; and the average couple will only receive about $2354 a month.  If this is not enough to cover your expenses, there is no reason why you have to accept the average payout as inevitable.  There are definite actions you can take during your working years that can make a significant difference after retirement.

How Your Benefits are Calculated

Did you know that the Social Security Administration calculates your benefits based on your 35 highest earning working years?  If you worked less than 35 years, this means that you may have a number of years with zero income averaged into your work history.  The more years you report an income, the better off you will be in retirement.   If you have worked 35 years, but earned very little income for some of them, replacing those low earning years with more recent years of work at a higher income will also make a difference.

For the same reason, there is a definite Social Security disadvantage for self-employed people who have routinely reduced their reported income by using the maximum number of deductions.  Before you retire, you want to have reported income for as many years as possible and you want to report all your income.  In the long run, you will benefit from this decision, especially if you live a long life.

Advantages of Delaying the Age When You Collect Your Benefits

In addition, if at all possible you do not want to begin to collecting your Social Security benefits until you are at least your full retirement age of about 66 or 67, depending on your current age.  Although you are allowed to begin receiving benefits as early as age 62, you will be paid approximately 25 percent less in benefits for the remainder of your life!  If you become a widow, even your survivor's benefits will be decreased.  If you can postpone receiving your benefits until you are age 70, your benefits will increase by 8 percent for each year you postpone filing after your full retirement age.

Advantage of Continuing to Work After You Begin Collecting Your Benefits

There is another way to increase your Social Security benefits.  You may decide that you will continue to work for a few years, even after you have begun to collect your benefits.  Not only will you receive annual cost of living increases when everyone else does, you may also receive an additional increase in benefits each year because you will continue to pay into the system.  The Social Security Administration recalculates your benefits each year based on the SSI taxes you paid during the previous year. This recalculation increases what you will receive now and in the future.

There are other strategies that have helped many people maximize their benefits.  You may want to order one of the Social Security books from that will help you figure out if there are other strategies that will work for you.

Everyone should also make an appointment with their local Social Security Administration office to ask questions and get more information to help them decide which strategies make the most sense for them.  We have found most employees to be knowledgeable and helpful (although we have received a few incorrect answers on occasion).  In addition, you may want to use one of the online calculators, such as AARP's Social Security Benefits Calculator, in order to estimate what your earnings would be under different scenarios.

If you are interested in learning how to maximize your finances after retirement, you may also be interested in reading these articles:

Do You Need a Million Dollars to Retire?
Cheap Places to Retire
Women and Social Security
Financial Facts Affecting Baby Boomers in 2013

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Photo of social security card courtesy of

This content of this blog is the property of Deborah Diane and may not be reprinted without her explicit permission.  All rights reserved.

1 comment:

  1. This is excellent advice and everyone should know about it. I'm going to share!


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