How to Maximize Social Security Benefits

Here are some tips for maximizing Social Security retirement benefits. Most of these strategies will be applicable to baby boomers contemplating and planning for a sustainable retirement income.

1. Delay claiming benefits as long as possible. Wait until age 70 if you can. The difference in monthly benefit you receive will be as much as 60% (7-8% per year you delay after age 62), for the rest of your life.

2.  Maximize your work credits. Your Social Security retirement benefit is based on your 35 highest earning years. Although you only need ten years of credits to be eligible, you should try to get credits for all 35 years.  Also, don’t slack off so much in the later years that you dramatically lower your average. In fact, you can continue working after you begin receiving Social Security.  You may earn up to $14,160 without reducing your benefit.  Above that, your benefit will be reduced by 50 cents for each dollar earned.

When you reach full retirement age (66-67), the outside earnings limit increases to $37,680 and your benefit is reduced by only 33 cents for each dollar earned above that. The earnings limit includes income from bonuses, commissions, and vacation pay but not pensions, investment income, interest, annuities, and government or military retirement benefits.

After your birthday in the year you reach full retirement age, any amount you earn will not affect your Social Security benefit.  Also, the earnings penalty is not permanent.   Once you reach your full retirement age, your benefit will be recalculated to give you credit for continued working.

3. Plan for spousal benefits. There are two ways for a married couple to simultaneously claim a retirement benefit from Social Security. The first way applies if both can claim a benefit on their own earnings record. The second way applies if one does not have enough earnings. That spouse can claim a benefit equal to 50% of the other spouses benefit.

In many cases, maximizing the total benefit involves this strategy: The higher earning spouse should delay claiming Social Security until at least full retirement age. The lower earning spouse should claim at age 62, based on his or her own earnings record. If the higher earning spouse (often the husband) dies first, the lower earning spouse can then switch to the survivor’s benefit which is based on the benefit received by the now deceased spouse.

If both spouses are working, one spouse can claim a 50% benefit based on the other spouses record, keep working, and then switch to his or her own benefit  later.

Finally, there is the “claim and suspend” strategy. If one spouse doesn’t have a qualifying earnings record, the higher earning spouse can claim and immediately suspend Social Security retirement benefits at full retirement age. This will allow the ineligible spouse to receive a benefit based on the working spouse’s record, yet allow the working spouse to obtain a larger benefit for delayed claiming.

I haven’t mentioned here the “claim, save, and give back” strategy. That is a more complicated way of delaying benefits while receiving an interest free loan from the government.

Consider these strategies carefully because your objective is to maximize your total lifetime benefits as a couple.

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