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How To Maximize Social Security Income Benefits

  • 14 October 2014
  • Author: Cari Holbrook
  • Number of views: 2979
How To Maximize Social Security Income Benefits

If you’re a working business owner and don’t need to take Social Security at 62 (the age at which eligibility kicks in), you’re better off delaying.  To put it simply: the longer you wait to receive Social Security benefits, the larger your monthly income from Social Security will be.  But how much more can you earn by waiting? What age is best for retirement, then? And what about your spouse? Let’s take a quick look at some answers.

According to the Social Security Administration (SSA), about one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. With that in mind, waiting until 70—the oldest you’re allowed to start receiving Social Security—is likely in your best interest. Here’s how the SSA calculates its yearly rate increases for delayed retirement:

Increase for Delayed Retirement

However, health plays an important role. If you have any reason to believe your life expectancy is below the average or you simply need the income from Social Security, then don’t feel pressure to wait. 

It’s also important to keep additional income in mind. Currently, the annual work income limit for receiving Social Security benefits, before normal retirement age, is $15,480. So, unlike other retirement savings you may have at your disposal, additional income makes a big difference in how much Social Security you’ll be eligible to receive, even if it’s passive income like investments. If you choose to keep earning elsewhere, look at the possibility of tapping into those other retirement funds first.

Then, as we’ve explained before, consider how your Social Security benefits will be taxed. Taxes kick in at 50 percent of benefits for a combined income level of $25,000 and at 85 percent of benefits at a combined income level of $34,000. Weigh the tax implications alongside other factors carefully.

Finally, if you’re married, consider who should start receiving Social Security first. Activating benefits at the same time a spouse does is rarely the best course of action.  More often, it’s best for the spouse with the higher Social Security benefits to wait longer. In this scenario, the spouse with the lower Social Security wage earnings may opt to start receiving benefits at, say, the early retirement age of 62. Once the spouse with the higher wage earnings begins receiving Social Security at 70, let’s say, the other spouse may be able to switch to that potentially higher rate, now even more valuable due to delayed retirement. Spousal benefits are 50 percent of the primary’s benefits.

Of course, everyone’s situation is different. What’s most important is to consider ways in which retirement planning methods like delaying Social Security or utilizing a spouse’s benefits first could put much more retirement money back in your pocket. 

Copyright: ginosphotos / 123RF Stock Photo

Categories: Blog, General
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