If you're approaching retirement, now's a good time to learn how to maximize your Social Security benefits. Some little-known strategies could boost your household’s benefits, whether you live alone or still have minor children at home.
- The ideal strategy for you might not work for your neighbor—and vice versa.
- Social Security representatives may give you incorrect advice that can cost you serious money.
- There are opportunities to increase your Social Security benefits later if you decide that you started claiming too early.
- Be proactive. Social Security won't tell you if you become eligible for specific benefits, such as those for divorced survivors and children.
1. Don’t Take the SSA’s Advice at Face Value
Going straight to the source seems like a great way to get accurate information about the best time to file for Social Security. But it’s not.
The Social Security Administration (SSA) representative you talk to might have good intentions when they offer advice about your specific circumstances. However, because this person is likely overworked and undertrained, they may give you incorrect information. And it could cost you tens of thousands of dollars throughout your retirement.
If you discover the mistake later, you might not be able to correct it, even if it stems from faulty advice from the SSA. That’s the SSA’s own rule. And many claiming decisions are irreversible.
If you do ask the SSA for advice, you’d be wise to consult with at least one financial advisor who specializes in retirement planning to get a complete picture of your options.
2. Withdraw Your Social Security Application
Here’s one opportunity to reverse a claiming decision you regret. If you’re within the first 12 months of claiming and you have enough cash available, you can withdraw your application and repay all the benefits you’ve received so far.
If you do, “then it is like you never claimed in the first place,” says Arthur Prunier, a retirement income certified professional® instructor at the American College of Financial Services.
“Lots of people file for Social Security without fully understanding the consequences,” he explains. “For example, many people choose to claim Social Security before full retirement age, but later wish they had not done so.”
After repaying what you received, you can claim a tax refund or credit for any taxes you paid on those benefits.
3. Suspend Your Social Security Benefits
Once you reach full retirement age, you can voluntarily suspend your Social Security benefits. Doing so will boost your future benefits—and you don’t need to repay the benefits you’ve already received.
Here’s an example from Prunier that illustrates why you might want to voluntarily suspend your benefits after full retirement age.
Susan started receiving Social Security benefits at age 63. Her full retirement age is 66, and her full monthly benefit is $1,000. Because she began receiving benefits 36 months early, her monthly benefit was reduced to $800.
At age 65, Susan decides it was a mistake to have started her benefits early. But more than 12 months have elapsed since starting benefits, so she can’t withdraw her application.
All is not lost. Susan can file to voluntarily suspend her benefits at age 66. For each month of suspension, Susan will earn delayed retirement credits worth 2/3 of 1% per month—or 8% per year.
If she waits until age 70 to resume her Social Security benefits, the strategy will increase her monthly benefit by 2/3 of 1% for 48 months, or 32%. Her former monthly benefit of $800 would increase to $1,056.
4. Maximize Your Household Benefits
If you have a spouse or minor children, you should consider how your claiming strategy affects them. This might mean using a different benefit strategy than the one you’d use to maximize your own benefit payment.
Your claiming decision affects family members. If you voluntarily suspend your own benefits, no one else can receive Social Security benefits based on your earnings record.
How else might you maximize your household’s Social Security benefits? The oft-heard advice is to postpone claiming until age 70 if you can afford to. But that may not be the best option if you’re in your 60s and still have minor children at home—not uncommon in blended families.
In this scenario, you might receive more benefits in the long run by claiming at a younger age so you can receive dependent benefits.
The dependent child benefit is equal to half of the claiming parent’s full retirement benefit, even if the parent claims early. The younger spouse may also be eligible for a spousal benefit. These additional benefits may offset the lower benefit you receive by filing early.
Factors that affect this decision include:
- The number of children who are in the household
- How long it will be until they turn 18 (or 19, if they're full-time students)
- The amount of your spouse’s benefit
- The age gap between the spouses (survivor benefits are permanently reduced if you claim early)
5. Know Every Benefit You’re Entitled To
The Social Security Administration doesn’t just pay retirement benefits directly to the worker who earned them. It also pays survivor benefits, divorced survivor benefits, spousal benefits, divorced spousal benefits, child benefits, and a few other types of benefits.
But because Social Security doesn’t inform individuals when they become eligible for these benefits, you could miss out on benefits if you aren’t proactive.
Here’s another example from Prunier. The survivor/widow/widower's benefit and the worker’s benefit are treated as two separate benefits. A person who lost their spouse before retirement may have the opportunity to receive a survivor benefit first, then switch to their own retirement benefit later, or vice versa.
“With a modest worker benefit and retirement at age 62, for example, one might take a reduced worker benefit at 62 and defer the larger widow’s benefit to full retirement age in order to get an unreduced benefit,” says Prunier.
“Or, if one is still working and the worker benefit after deferral credits will exceed the survivor benefit, one can claim the survivor benefit at full retirement age and switch to the worker benefit at 70.”
However, Prunier also warns you should remember that for all “unusual” approaches to boosting Social Security benefits, significant restrictions or exceptions may apply. Anyone thinking about taking advantage of these approaches should always ask themselves:
- Do I understand what restrictions apply?
- Do I fulfill all the requirements to take advantage of this approach?
- Could there be unintended consequences with this approach?
6. Use a Good Calculator
A good calculator can help you crunch the numbers and find the strategy that works best for your situation. Here are three options worth checking out:
- Social Security Timing (free)
- Maximize My Social Security ($40/yr)
- Social Security Retirement Estimator (free)
The Bottom Line
Social Security benefits are an essential part of any retirement plan. You’re entitled to them if you or your spouse have earned 40 credits by paying into the system for at least 10 years. You should absolutely try to max out your payback within the law’s parameters.
Unfortunately, your options for maxing out your benefits are often poorly publicized by the Social Security Administration. And even asking an agency representative to assist you personally may result in subpar advice—and lost benefits.
That’s why it’s essential to educate yourself about the available benefits and filing strategies. Run through various scenarios with a financial planner and an advanced Social Security calculator before actually filing. With this knowledge, you’ll be able to claim your benefits in a way that’s most likely to provide the maximum return for your household.