Maximizing Your Social Security Income

Your decision about when and how to file for Social Security benefits can significantly change the money that goes into your pocket during retirement. Regardless of income levels, Social Security is a significant component of almost every retiree’s portfolio. For many, Social Security income is their largest source of lifetime retirement income.

Today, full Social Security benefits begin at age 66 and 67 for most adults. There are, however, options to get reduced benefits as early as age 62, or to delay benefits up to age 70, which will increase your monthly income amount. Filing early may make sense for some retirees, but it is important to understand the limitations of that choice and the opportunity you may miss to increase your Social Security income.

The longer life expectancies of today’s retirees mean you will likely need Social Security income for a longer period of time than previous generations. For everyone, there is a break-even point at which accumulating higher benefits over a shorter period outweighs collecting smaller benefits over a longer period. This means that you may benefit financially from taking advantage of delaying rules that will grow your monthly benefit.

What you need to know is that Full Retirement Age (“FRA”) is the age when you are eligible to receive full social security benefits based on your lifetime employment record. The amount to which you are entitled is called your Primary Insurance Amount (“PIA”), which is based on your lifetime Social Security earnings, adjusted for inflation. The benefit amount reflects a percentage of your average monthly earnings. The PIA was capped at $2,663 per month for 2015.

An individual with age 66 FRA, could “grow” his or her Social Security income by as much as 76% by delaying benefits until age 70 as compared to filing for benefits early at age 62. The reduced benefit at age 62 would be 75% of the full benefit available at age 66. By delaying benefits filing until age 70, the benefit amount would increase up to 32% above the PIA.

There are also ways to coordinate spousal benefits with survivor benefits by carefully planning how and when benefit applications are filed. Spousal benefits can be taken as soon as FRA is reached, or benefits are otherwise available. Then, survivor benefits are taken upon widowhood. When one spouse is the primary wage earner, or there is a large age gap between spouses, allowing that person’s benefit to grow while spousal benefits are paid will ultimately result in an increased survivor’s benefit.

It is important to coordinate your Social Security decision with your overall retirement and estate plans since this decision will affect your financial situation throughout retirement. At Kling Law Offices, we welcome the opportunity to discuss ways you can maximize your Social Security and how this planning dovetails with a well-planned estate. Our goal is to help you plan for the peace of mind you deserve.