Here’s the thing: retirement is expensive. Typical American workers believe that they need $1.46 million to retire comfortably. That’s a lot of money.
Retirement can cost you even more if you live in New York, California, Connecticut, and Vermont. Not only are the cost of living high in these states, but they also impose the highest individual income tax.
For Americans, Social Security is a significant part of their income. As of this year, the Social Security benefit is $1,927/month. That equals about $23,000 annually. That’s helpful, but it’s not enough for most people to live comfortably, especially in high-cost states. Fortunately, it’s expected to increase to $1,976 per month in 2025.
But here’s the surprising part: some retirees receive Social Security checks of up to $4,000 monthly. Curious about how to make the most of your Social Security benefits like others have? Keep reading; we’ll share some tips that can help you maximize your benefits.
1. Work as Long as You Can
You can collect your Social Security benefit between age 62 and 70. But don’t claim it so early. Instead, work beyond your retirement age. That can help boost your benefits. The Social Security Administration (SSA) determines the benefit amount utilizing the earnings history. It computes benefits based on your highest 35 years of earnings. Your recent income can replace some lower-earning years from earlier on if you keep working. This could significantly increase your benefits.
Even if you’re not making the big bucks later in life, every little bit helps. Each extra year you work could still raise your average earnings, giving you a bigger check in retirement.
2. Claim Spousal Benefits
If you and your partner were born before Jan. 2, 1954, you both have reached full retirement age (FRA). Rather than claiming both your own retirement benefits and spousal benefits right away, claim only your spouse’s. You can receive up to 50% of your spouse’s full retirement benefit.
Meanwhile, your own benefits will increase if you wait to claim them up to age 70. That is because you will earn delayed retirement credits, informs Investopedia. That will result in a bigger monthly benefit when you finally file for them.
Don’t delay collecting your spousal benefits, however. You won’t receive any benefits if you delay claiming them beyond your retirement age. One thing to remember: if you were born on Jan. 2, 1954, or later, you cannot choose to receive only spousal benefits while deferring your own. That is to say, you will have to file for all benefits for which you are eligible, including your own retirement benefit.
Once you file, you will receive the higher of the two benefits: either your own retirement benefit or the spousal benefit. Note that you cannot switch from the spousal benefit to your own retirement benefit later if it becomes more advantageous down the line.
3. Delay Claiming the Benefits Until You’re 70
Almost everyone knows their FRA. For individuals born between 1943 and 1954, the age is 66. The FRA gradually increases to 67 for those born from 1955 to 1959, and it is 67 for individuals born in 1960 or later.
Very few people know that delaying Social Security can boost benefits by up to 8% per year past their FRA, up to age 70. This can really add up over time, giving you a larger safety net as you age. Your benefit, according to MyStages, will be 77% higher if you collect it at 70 years instead of 62.
For more detailed information on how you can maximize your Social Security benefits by delaying it, refer to a Social Security guide. These guides provide valuable insights into the intricacies of Social Security benefits. Thus, you will be able to make informed decisions about when to claim the benefits.
4. Avoid Social Security Tax
It might come as a surprise to you, but Social Security benefits are taxable. Approximately 40% of Americans who receive Social Security have to pay federal income taxes on their benefits.
Most recipients end up paying income tax because their total income—combining Social Security with other sources—exceeds the income thresholds for taxation. If you have other sources of income—like a pension, retirement accounts, or even interest from savings—you could be in for a surprise at tax time.
To avoid or minimize these taxes, manage your income levels strategically. For single filers, this means keeping your combined income under $25,000 to avoid any taxes on your benefits. For married couples, on the other hand, that threshold is $32,000.
Also, think about spreading out income from investments or retirement accounts over several years instead of taking a big lump sum. This way, you can keep your taxable income lower.
Getting the most out of Social Security boils down to timing, strategy, and understanding how your personal situation fits into the bigger picture.
It’s not one-size-fits-all; what works for one person may not be the best for you. Take time to understand the system and plan ahead. This way, you’ll be able to make informed decisions that pave the way for a more comfortable retirement.
