If you want to do all you can to maximize your Social Security benefits, take a look at this article below to make sure you’re not at risk of losing out on some of your money.
10. You Haven’t Worked Long Enough
Did you know that the amount of your Social Security benefits is based on inflation-adjusted average earnings over your 35 highest-earning years? Yep, it’s true. So, what does that mean for you? Well, it means that you have to have worked at least 35 years, or else you run the risk of having zero-dollar years included when your average is calculated. And, if that happens, your benefit amount will automatically be lower than it would have you worked 35 years or more.
9. You’re Considering Claiming Benefits Before the Age of 70
Are you thinking about claiming your benefits before the age of 70? You might want to think again. That’s because claiming your benefits before you reach age 70 will automatically reduce the amount you’ll receive each month due to early filing penalties. So, what happens if you wait until you’re 70? Your delayed retirement credits will increase the amount you receive each month.
TIP: There’s no need to delay retirement any further than age 70 because you won’t earn any more delayed retirement credits after that point.
8. You’re Thinking About Relocating
If you want to maximize your Social Security benefits, you’ll want to make sure you don’t move to one of the 13 states that tax Social Security benefits. These states include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia. “If you’re considering relocating to any one of them, make sure you know if your retirement benefits will be subject to state tax. If they will, consider how much you’d lose by living there,” The Motley Fool said in an article it published.
DID YOU KNOW?
According to studies, seven of the 13 states mentioned above are some of the worst states to retire in. Here’s how those states ranked:
Rhode Island – 7th
New Mexico – 8th
Connecticut – 12th
Minnesota – 14th
North Dakota – 19th
West Virginia – 19th
Colorado – 25th
7. You’re Considering Going Back to Work
First of all, let us be clear on one thing: if you’ve already reached full retirement age, going back to work will have no effect on the number of your benefit checks. If, on the other hand, you’ve taken early retirement and you’re considering going back to work to have both a paycheck and a Social Security check, you’ll likely have some of your benefits withheld if you earn too much from your job. With that said, you’ll need to do some research to see how much you can earn without having to forfeit some of your benefits.
6. You’re Not Earning More
The more you earn the greater the amount of your Social Security benefit checks. Makes sense, right? That being said, if you want to maximize your Social Security benefits, you will need to find a way to increase your income prior to retiring. This can be done either by asking for a raise at work or getting a second job. You could also do it by deciding to work longer. If you decide to work until you reach full retirement age, you’ll automatically earn more in the long run.
5. You’re Not Coordinating with Your Spouse
The decision to retire not only affects an individual, but it also affects their spouse, too. For example, if a person waits to claim their benefits, their husband or wife cannot get spousal benefits on their spouse’s work record until the spouse claims benefits. Not only that but if a person claims ahead of full retirement age and they are the higher earner, their spouse could have their survivor benefits reduced. When one spouse dies, the surviving spouse gets the larger of the two checks instead of continuing to receive both their own check and the deceased spouse’s check as well.
4. You’re Receiving Medicare
According to an article published by Investopedia, Medicare premiums will shrink your Social Security check if you sign up for Part B. That’s because the premiums for Part B are deducted from your Social Security benefit checks each month. The standard Part B premium amount in 2020 is $144.60. That’s for individual tax returns with an annual income of $87,000 or less, joint tax returns with an annual income of $174,000 or less, and married & separate tax returns with an annual income of $87,000 or less.
There is a bit of good news, however. “If your income has recently dropped, you may appeal to the SSA for a lower premium. The IRS may be providing the SSA with older data that needs to be updated,” James B. Twining, CFP, founder, and CEO of Financial Plan, Inc., told Investopedia.
3. You’re Not Including Your Family
Here’s something you may not have known: if you have dependent children under the age of 19, you may be able to get additional Social Security payments for them. So, how much exactly can you get? Well, according to U.S. News & World Report, you could get up to one half of your full retirement benefit to certain annual limits.
The Social Security Administration explains the idea on its website:
“The basic concept of the Social Security program is that it is designed to partially offset the loss of income to the family when a worker retires, becomes disabled, or dies. The rationale for paying benefits for minor children was that when a retired or disabled wage earner has dependent children, the number of lost earnings that need to be replaced is greater than if the worker is single, and so a benefit is paid for each dependent child.”
2. You Didn’t Minimize Social Security Taxes
According to an article published by U.S. News & World Report, “if the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit is more than $25,000 for individuals and $32,000 for couples, up to 50 percent of your Social Security benefit could be taxable. If these income sources top $34,000 ($44,000 for couples), income tax could be due on as much as 85 percent of your Social Security benefit.” Therefore, you will need to find ways to minimize taxes on your Social Security benefits. This can include such things as staying below the taxable thresholds, setting up a Social Security tax withholding, factoring in state taxes, and taking IRA withdrawals before signing up for Social Security.
1. You are Subject to an Offset
Did you know that your debts can reduce your Social Security benefit checks? Yep, it’s true. Examples of the kinds of debts that can offset your check include defaulted student loans, unpaid alimony or child support obligations, and back taxes. Social Security Administration regulations protect the first $750 in benefits you receive. A certain amount will reduce the rest of your benefits until your debt is paid in full. After that, you’ll receive your maximum benefit amount.
FYI, you could also be subject to an offset if you receive Social Security benefits before you reach full retirement age, and you continue to work.
Looking for more ways to maximize your Social Security benefits? Check out this article discussing the U.S. states that don’t tax retirees income.