Get the Maximum Pay Out from Your Social Security
Here’s the problem…
The standard retirement age for Social Security benefits is currently between 65 and 67 depending on our birth date. But we can start out retirement benefits as early as age 62 or as late as age 70. However, starting benefits at age 62 will give us 25% less monthly income. Waiting until age 70 can give us 32% more monthly income.
If you decide to start your benefits at age 62 you will receive 25% less monthly income but you may receive it for 8 more years. If you decide to start your benefits at age 70 you will receive 32% more monthly income but for 8 fewer years.
Let’s assume that you qualify for a monthly income benefit of $2000 at age 66 and that you will receive that benefit for 20 years assuming you live to age 86.
If you decide to begin benefits at age 62 you would only get $1500, $500 less every month. However, you would get it for 24 years – not 20. If you decide to wait until age 70 you would get $2640, almost $900 more every month but for only 16 years – not 20.
You would need to consider your spouse’s benefits in your comparison calculations, the cost of living increases over 20 or 30 years of retirement.
When to begin taking income is only one of many options or decisions that can affect your benefits. You can also continue to work while you receive your Social Security benefits. If you take benefits before age 66 and you are still employed, your benefits could be reduced by $1 for every $2 you earn above the annual limit, which can change each year based on your birth date.
Your Social Security benefits could also be taxable. Based on all of your income including wages, interest earnings, dividends and any other taxable income, up to 85% of your Social Security benefits could be taxable which could reduce your net spendable income by 20% or more!
With the government’s need for additional revenue, that 85% could well become 100%!
There are ways to reposition certain assets and ways to receive your other income that can minimize or even avoid the tax implications on your Social Security benefits. That alone can easily add another 20% to your lifetime benefits.
There are several lesser known techniques that can further optimize your total benefits.
For example there’s a way to collect your spouse’s benefits while your own benefits grow by 8% each year. And a way to take some benefits early, then later decide to reverse your decision and recapture the 32% bonus at age 70.
Obviously there are many factors and options to consider when making your Social Security decisions. And the wrong decisions can cost you hundreds of dollars each month which can amount to hundreds or thousands over 20 or 30 years of retirement.
That’s why the best strategy for each one of us should be based on a combination of several factors including our lifestyle, our health, our marital status, our life expectancy, our employment and of course our other sources of income.
So how can you consider all these factors? Compare various strategies and know what combination of decisions will yield the maximum income benefits for your own particular circumstances. Talk with a qualified financial advisor. One who understands the complexity of Social Security and can calculate the benefits of various strategies and help you decide which strategy is best for you.
This content is for informational purposes only. It does not reference, represent or recommend any specific product or company. References to interest rates, tax rates, growth rates or earnings assumptions are hypothetical, and all tax or legal implications should be verified by a qualified professional.