Strategies for Maximizing Social Security
Recent changes in the law have eliminated many of the “file and suspend” methods once used to max out benefits. Today, the best strategy is to wait to file.
While it was not originally intended to be a national retirement plan, today many people count on Social Security to help cover their costs during retirement. After a lifetime of working and having income withheld for Social Security, the next concern is how to make the most of this benefit. Social Security uses a formula to determine how much you will receive based on when you reach your full retirement age, which today is from 66 to 67—depending on the year that you were born.
Although these calculations sound complex, in its recent article “How to boost your Social Security benefit,” Vanguard says there's something easy you can do to up your benefit: DELAY IT!
Hard to believe, but delaying your Social Security benefits as long as possible is the best thing for many retirees.
The Social Security Administration reports that nearly 75% of retirees who receive benefits take reduced payments because they filed before reaching FRA. If you wait and take your benefits at age 70, you easily can maximize your benefit. If you continue to work between ages 62 and 70 and earn more than ever before, the numbers used to calculate your lifetime earnings will increase, which may up the benefit you're eligible to receive when you decide to collect benefits.
Coming up with the best time to take benefits requires some thoughtful planning that also includes your spouse’s situation and earnings history. Other factors include the age difference between you and your spouse, your health and your spouse’s health, expectations for longevity, spending habits and your overall financial situation. Don’t plan in a vacuum. Do good planning, and enjoy your retirement!
Reference: Vanguard (June 21, 2016) “How to boost your Social Security benefit”