How to Maximize Your Social Security Benefits

Are you approaching retirement age and considering how your Social Security benefit plays into your plans? Did you know that there are a variety factors that can contribute to your ability collect your full potential benefit?

When it comes to understanding your Social Security benefit, you may be wondering about your eligibility and how to maximize your Social Security income. Here are some of the most important factors to keep in mind when calculating your potential Social Security benefit.

Requirements to Qualify For Social Security Retirement Benefits

Social Security retirement benefits are based on your lifetime average earnings and your age when payments begin. In order to qualify, you must work for at least 40 quarters (10 years of work where you paid Social Security taxes) and have attained age 62.

Determine Your Full Retirement Age

Before you can figure out what your Social Security benefit will be, you need to determine your full retirement age (FRA), which is calculated based on your birth year. You can use this chart to find yours:

Birth YearFRA
1943-1954Age 66
1955Age 66 + 2 months
1956Age 66 + 4 months
1957Age 66 + 6 months
1958Age 66 + 8 months
1959Age 66 + 10 months
1960+Age 67

Once you know your FRA, you can strategize the timing for collecting your benefit. There are certain advantages to waiting until you reach your FRA, rather than cashing in early.

If you wait until you reach your FRA, you can collect 100% of your benefit. And if you wait until between your FRA and age 70, your benefits have the potential to increase by 32% by the time you reach 70.

On the other hand, if you begin to collect before you reach your FRA, you risk losing out on some of your benefit. You can start benefits as early as 62 but in doing so your benefits may be reduced by as much as 30%. If you collect between age 62 and FRA, you may end up with up to a 25% reduction in the total benefit you receive.

Look into the Impact of Your Marital Status*

Your marital status impacts your Social Security benefit, depending on whether you are married, widowed, or divorced. In any of these cases, you may be eligible to collect benefits based off of your spouse’s past earnings. Speak with your financial advisor to learn more about how your situation will affect your benefit.

Consider Your Employment Situation

Your past and current (if applicable) employment situations will also affect your Social security benefit. While your FRA and retirement status are the biggest factors here, other retirement benefits and your income leading up to the year of your FRA may also come into play.

For example, if you qualify for an employer sponsored pension plan that is not covered by Social Security, such as Federal Civil Service, your Social Security benefit may be lessened or eliminated.

You also want to take care to pay close attention to your income in the years leading up to your FRA. If you plan to work between age 62 and your FRA and will be earning more than $17,640, you’ll lose out on $1 in benefit for every $2 you earn above the income threshold. If you do not plan to work beyond age 62 but still have income in excess of $46,920 in the year before the month that you reach your FRA, you’ll lose out on $1 for every $3 you earn above the threshold.

Note: the earnings limits are as of 2019 and adjusted annually for national wage trends.

Calculate Your Tax Responsibility

Lastly, once you’ve run the numbers on your anticipated Social Security benefit, you’ll want to take a look into how this benefit will be taxed once you begin receiving checks in the mail. To calculate your tax responsibility, you can add your provisional income plus 50% of your Social Security income and see which tax bracket you fall into.

If you’d like to learn more about planning for retirement, contact Jacob Sturgill today!

    *Information received from MFS 2019 Social Security Reference Guide.