Everyone nearing retirement always seems to have a ton of questions surrounding how to maximize their Social Security benefits. These questions range from “When should I take Social Security?”, “How Can I maximize my Social Security benefits?”, “Are Social Security benefits taxable?” to “Can you help me choose the best time to start receiving Social Security?” The list of Social Security questions goes on and on. A fabulous financial planner should be able to help you answer your various Social Security questions and find the optimal time for you to claim Social Security benefits.
Sadly, many Americans enter retirement with no plan to maximize their Social Security benefits. Many have no idea how much after-tax income they will get from Social Security or when the best time to claim benefits would be based on their personal financial needs. Even more shocking is how few financial advisors are willing and able to help their clients with the litany of questions about Social Security benefits.
1. Get Your Annual Social Security Statement
If you want to maximize your Social Security benefits, it helps to have an idea of your future SS income. The best way to do this is to get your Social Security estimation of benefits. You can register for free access to your complimentary Social Security Administration (SSA) estimate on the Social Security website. They will send you an annual statement with your updated Social Security estimates.
Your Social Security statements will give you a baseline of what your future benefits could look like at various ages. Most importantly, as it stands today, in 2024, 62 years old is the earliest age you can claim Social Security, 67 is the full retirement age, and 70 is the latest you can claim Social Security.
2. Earn More Money To Maximize Social Security Benefits
For most Americans, earning more money will increase their future Social Security benefits. In 2024, your first $168,600 payroll income will get hit with Social Security taxes and help boost your future retirement income.
Even just a year of higher income can drop off lower income years, increasing your Social Security benefits in the future.
If you were wondering, Social Security benefits are calculated based on your highest income, 35 years of working and paying into Social Security. If you haven’t worked for the entire 35 years, when reaching retirement age, you will see zero Social Security credit for the year you didn’t work. This can reduce your eventual retirement income from Social Security.
3. Delay Claiming Social Security
Delaying when you claim Social Security is the easiest way to get the largest monthly Social Security check. Working longer and waiting when you claim Social Security will allow you to maximize your Social Security benefits. You don’t necessarily need to claim Social Security benefits at the time of your retirement. For example, you could retire at 60 and still wait until 70 to claim Social Security benefits.
4. Tax Planning For Your Retirement Income
Proactive tax planning can help you increase your take-home pay in retirement. For example, being strategic with Required Minimum Distributions (or any taxable retirement account withdrawals) can help reduce or eliminate tax on your Social Security income (at least in specific tax years). You can also avoid your Medicare premiums’ income-related monthly adjusted amount (IRMAA) charges. Likewise, tax planning can help minimize the Medicare surtax on investment income for high-income-earning retirees.
5. Increase Tax-Free Income In Retirement
Tax diversification can help you make your proactive tax planning (mentioned above) even more valuable. Ideally, you would have pre-tax retirement accounts (401(k), traditional IRA or Cash Balance Pension Plan), post-tax savings or investments account, as well as Roth IRAs or Roth 401(k) assets.
The more of your portfolio in Roth accounts, the larger your tax-free income in retirement will be.
6. Work With A Fiduciary Financial Planner
Few Americans seek professional fiduciary financial planning guidance to make the optimal Social Security elections. This means many are leaving thousands of dollars on the table in missed Social Security benefits over their lifetimes, not to mention paying more taxes than is necessary. Who likes overpaying their taxes anyway?
For proactive guidance to determine the best Social Security claiming strategy for you and your spouse (if you have one), a wise decision could be to work with a fiduciary financial planner who specializes in how to claim Social Security benefits. This is especially valuable if you dislike dealing with this or have a complicated financial situation.
I will remind you that Social Security Administration employees are not allowed to give specific advice. Similarly, many so-called financial advisors do not provide good Social Security-claiming guidance because they don’t know how and aren’t compensated for it.
You’ve worked hard for decades to accumulate your Social Security benefits; don’t you owe it to yourself to ensure you maximize your Social Security income over your lifetime?
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