Money

5 Ways to Maximize Social Security Benefits

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As you get older, your long-term plans may shift. Children leave home and you find yourself ever-closer to retirement.

Financially, you may be thinking about life insurance to leave a legacy when you're gone. Or, you may be curious about your Social Security payout. You may be wondering, how can I maximize my Social Security?

Knowing how to maximize Social Security benefits starts long before retirement. Your Social Security planning strategies can begin to gain traction even when you're young. So let's take a closer look at some of the factors that play into your Social Security payout options and how to maximize your benefits.

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1. Stay in the workforce for 35 years or more

Here's the first thing to understand when learning how to maximize Social Security benefits: The Social Security Administration (SSA) determines how much money you'll receive by looking at your annual earnings for the 35 years when you earned the most. It then takes the average of those 35 years and uses a mathematical formula to determine your benefit. The higher your salary during those 35 years, the more you'll receive.

If you worked less than 35 years, the SSA would count your non-working years as zero earnings, lowering the final average, and you'll receive less of a benefit. So, it pays to stay in the workforce, even if your job isn't a high-paying one. If you can bump up your annual earnings during those years by taking on an additional part-time job, for example, your SSI benefits will increase even more.

2. Retire when you're older

It's a good idea to check your Social Security account regularly. One of the first things you'll notice is that the estimated amount you'll receive monthly if you retire at 65 is less than what you'd get if you retire at 70, or even at 67 or 68. Why? The Social Security Administration increases the amount of your benefits by 8% each year after you turn 65 until you reach 70. After 70, it remains static. 

When planning out Social Security retirement scenarios, it pays to consider the age differential. If you're in good health and you enjoy your work, it makes sense to stick with it until you've reached age 70. You may be rewarded with a significantly higher payout than you would have received at age 65. 

3. Be aware of tax implications

Although tax law is complicated and you should consult with a tax advisor to work through your unique circumstances, let's lay out a rough idea of what you may want to know about taxes when you're hoping to maximize Social Security benefits. When you're retired, the IRS adds up your adjusted gross income, along with nontaxable interest, and adds that to half of your Social Security benefit. If that total is more than $25,000 for single filers or $32,000 for those filing jointly, then up to 50% of your Social Security income may be taxed.

If the amount is more significant than $34,000 for a single filer or $44,000 for joint filers, then the IRS may consider up to 85% of your Social Security benefits taxable. You may minimize this by holding off on making withdrawals from your IRA or other income. 

A qualified financial or tax planner can also work with you to develop tax strategies to maximize your Social Security benefits.

4. Take advantage of spousal benefits

Another way to maximize Social Security is available if you are (or were) married. You may be eligible for benefits if your spouse has already filed for their benefits and you're at least 62. These benefits are based on your spouse's income. It may make sense to apply for them if your spouse earned more than you or if you were a stay-at-home partner who didn't pay into Social Security. 

You may even be eligible earlier than age 62 if you have a dependent child under age 16 at home or a child collecting Social Security disability payments.

Even if you're divorced, you may be able to benefit from your former spouse's benefits. You may be eligible if you haven't remarried and were previously married for at least 10 years. Spousal benefits may be up to 50% of your spouse's payout. So, if your former spouse receives a Social Security check of $2,000 each month, the maximum you can receive is $1,000.

5. Seek professional guidance

Planning for retirement is challenging and dependent on your specific circumstances. Consider hiring a financial consultant to provide Social Security benefits advice. They can answer your specific questions.

Another good source of information regarding life insurance is Ethos Life's informative blog, where you can check out how much life insurance you need and how to determine the amount of money you should save at every age

In addition, although we'll never bother you with annoying calls from agents (unless you’d like to speak with an agent), our knowledgeable staff is always available to answer your questions about online life insurance to help provide financial security and peace of mind.

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