Social Security falling short? Top tips to maximize benefits

Social Security tips for couples

Social Security falling short? Top tips to maximize benefits

  • A couple with similar incomes and ages and long life expectancies may want to consider maximizing lifetime benefits by both delaying their claim.
  • For couples with big differences in earnings, consider claiming the spousal benefit, which may be better than claiming your own.
  • A couple with shorter life expectancies may want to consider claiming earlier.

Married couples may have some advantages when deciding how and when to claim Social Security.

Even though the basic rules apply to everyone, a couple has more options than a single person because each member of a couple1 can claim at different dates and may be eligible for spousal benefits.

Making the most of Social Security requires some strategy to take advantage of the basic benefit rules, however. After you reach age 62, for every year you postpone taking Social Security (up to age 70), you could receive up to 8% more in future monthly payments.

(Once you reach age 70, increases stop, so there is no benefit to waiting past age 70.) Members of a couple may also have the option of claiming benefits their own work record, or 50% of their spouse’s benefit.

For couples with big differences in earnings, claiming the spousal benefit may be better than claiming your own.

What's more, Social Security payments are reliable and should generally adjust with inflation, thanks to cost-of-living increases. Because people are living longer these days, a higher stream of inflation-protected lifetime income can be very valuable.

But to take advantage of the higher monthly benefits, you may need to accept some short-term sacrifice. In other words, you'll have less Social Security income in the first few years of retirement in order to get larger benefits later.

“As people live longer, the risk of outliving their savings in retirement is a big concern,” says Ann Dowd, a CFP® and vice president at Fidelity. “Maximizing Social Security is a key part of how couples can manage that risk.”

A key question for you and your spouse to discuss is how long you each expect to live. Deferring when you receive Social Security means a higher monthly benefit.

But it takes time to make up for the lower payments foregone during the period between age 62 and when you ultimately chose to claim, as well as for future higher monthly benefits to compensate for the retirement savings you need to tap into to pay for daily living expenses during the delay period.

But when one spouse dies, the surviving spouse can claim the higher monthly benefit for the rest of their life.

So, for a couple with at least one member who expects to live into their late 80s or 90s, deferring the higher earner's benefit may make sense.

If both members of a couple have serious health issues and therefore anticipate shorter life expectancies, claiming early may make more sense.

How ly are you to live to be 85, 90, or older? The answer may surprise you. Longevity has been steadily increasing, and surveys show that many people underestimate how long they will live.

According to the Social Security Administration (SSA), a man turning 65 today will live to be 84 on average and a woman will live to be 86.6 on average. For a couple at age 65, at least one person, on average, will survive to age 93.

Further, 1 in 4 65-year-old males today will live to 93, and 1 in 4 females will live to 95.2

Tip: To learn about trends in aging and people living longer, read Viewpoints on Fidelity.com: Longevity and retirement

View the entire webcast.

A couple with similar incomes and ages and long life expectancies may maximize lifetime benefits if both delay.

How it works: The basic principle is that the longer you defer your benefits, the larger the monthly benefits grow. Each year you delay Social Security from age 62 to 70 could increase your benefit by up to 8%.

Who it may benefit: This strategy works best for couples with normal to high life expectancies with similar earnings, who are planning to work until age 70 or have sufficient savings to provide any needed income during the deferral period.

Example: Willard's life expectancy is 88, and his income is $75,000. Helena's life expectancy is 90, and her income is $70,000. They enjoy working.

Suppose Willard and Helena both claim at age 62. As a couple, they would receive a lifetime benefit of $1,100,000. But if they live to be ages 88 and 90, respectively, deferring to age 70 would mean about $250,000 in additional benefits.

Example assumes both individuals turning 62 in 2019. The hypothetical example is calculated by Fidelity Financial Solutions Team, data and methodology published by Social Security Administration as of March 2020.

All benefits are calculated in today dollar and before tax. The actual benefit would be adjusted for inflation and might be subject to income tax. Lifetime benefits are life expectancy of 88 and 90 for husband and wife, respectively.

The lifetime number is sensitive to, and would change with, the life expectancy assumption.

A couple with shorter life expectancies may want to claim earlier.

How it works: Benefits are available at age 62, and full retirement age (FRA) is your birth year.

Who it may benefit: Couples planning on a shorter retirement period may want to consider claiming earlier.

Generally, one member of a couple would need to live into their late 80s for the increased benefits from deferral to offset the benefits sacrificed from age 62 to 70.

While a couple at age 65 can expect one spouse to live to be 85, on average, couples who cannot afford to wait or who have reasons to plan for a shorter retirement, may want to claim early.

Example: Carter is age 64 and expects to live to 78. He earns $70,000 per year. Caroline is 62 and expects to live until age 76. She earns $80,000 a year.

By claiming at their current age, Carter and Caroline are able to maximize their lifetime benefits. Compared with deferring until age 70, taking benefits at their current age, respectively, would yield an additional $113,000 in benefits—an increase of nearly 22%.

Example assumes Carter turning 64, Caroline turning 62 in 2019. The hypothetical example is calculated by Fidelity Financial Solutions Team, data and methodology published by Social Security Administration as of March 2020.

All benefits are calculated in today dollar and before tax. The actual benefit would be adjusted for inflation and might be subject to income tax. Lifetime benefits are life expectancy of 78 and 76 for husband and wife, respectively.

The lifetime number is sensitive to, and would change with, the life expectancy assumption.

Maximize Social Security—for you and your spouse—by claiming later.

How it works: When you die, your spouse is eligible to receive your monthly Social Security payment as a survivor benefit, if it's higher than their own monthly amount. But if you start taking Social Security before your full retirement age (FRA), you are permanently limiting your partner's survivor benefits.

Many people overlook this when they decide to start collecting Social Security at age 62. If you delay your claim until your full retirement age—which ranges from 66 to 67, depending on when you were born—or even longer, until you are age 70, your monthly benefit will grow and, in turn, so will your surviving spouse's benefit after your death.

(Get your full retirement age)

Who it may benefit: This strategy is most useful if your monthly Social Security benefit is higher than your spouse's, and if your spouse is in good health and expects to outlive you.

Example: Consider a hypothetical couple who are both about to turn age 62. Aaron is eligible to receive $2,000 a month from Social Security when he reaches his FRA of 66 years and 6 months.

He believes he has average longevity for a man his age, which means he could live to age 85. His wife, Elaine, will get $1,000 at her FRA of 66 years and 6 months and, her health and family history, anticipates living to an above-average age of 94.

The couple was planning to claim at 62, when he would get $1,450 a month, and she would get $725 from Social Security. Because they’re claiming early, their monthly benefits are 27.5% lower than they would be at their FRA.

Aaron also realizes taking payments at age 62 would reduce his wife's benefits during the 9 years they expect her to outlive him.

Example assumes both individuals turning 62 in 2019. The hypothetical example is calculated by Fidelity Financial Solutions Team, data and methodology published by Social Security Administration as of March 2020.

All benefits are calculated in today dollar and before tax. The actual benefit would be adjusted for inflation and might be subject to income tax. Lifetime benefits are life expectancy of 85 and 94 for husband and wife, respectively.

The lifetime number is sensitive to, and would change with, the life expectancy assumption.

If Aaron waits until he's 66 years and 6 months to collect benefits, he'll get $2,000 a month.

If he delays his claim until age 70, his benefit—and his wife's survivor benefit—will increase another 28%, to $2,560 a month.

(Note: Social Security payout figures are in today’s dollars and before tax; the actual benefit would be adjusted for inflation and possibly subject to income tax.)

Waiting until age 70 will not only boost his own future cumulative benefits, it will also have a significant effect on his wife's benefits. In this hypothetical example, her lifetime Social Security benefits would rise by about $69,000, or 16%.

Even if it turns out that Elaine is overly optimistic and she dies at age 94, her lifetime benefits will still increase approximately 34% and she would collect approximately $129,000 more in Social Security benefits than if they had both claimed at 62 (vs. both waiting until age 70 to claim Social Security). If Elaine dies at 90, she will have 1.6% more benefits, or $6,000.

In situations where the spouse's Social Security monthly benefit is greater than their partner's, the longer a spouse waits to claim Social Security, the higher the monthly benefit for both the spouse and the surviving spouse. For more on why it's often better to wait until at least your FRA before claiming Social Security, read Viewpoints on Fidelity.com: Should you take Social Security at 62?

Social Security can form the bedrock of your retirement income plan. That's because your benefits are inflation-protected and will last for the rest of your life.

When making your choice, be sure to consider how long you may live, your financial capacity to defer benefits, and the impact it may have on your survivors.

Consider working with your Fidelity financial advisor to explore options on how and when to claim your benefits.

Источник: https://www.fidelity.com/viewpoints/retirement/social-security-tips-for-couples

Social Security: 10 Smart Ways to Get More Benefits

Social Security falling short? Top tips to maximize benefits

Without Social Security benefits, 22 million Americans would be poor — per a report from the Center on Budget and Policy Priorities.

About 21% of married elderly beneficiaries and 44% of unmarried ones get fully 90% or more of their income from Social Security, while about 48% of married elderly beneficiaries and 69% of unmarried ones get 50% or more of their income from it, according to the Social Security Administration.

How much money are we talking about? Well, the average Social Security retirement check was recently $1,417, or about $17,000 annually. If that doesn't seem much, know that there are ways to increase your benefits. Here are 10 strategies to consider:

  1. Check your record
  2. Work for at least 35 years
  3. Earn more
  4. Delay starting to collect your benefits
  5. Start collecting early, at 62
  6. Collect a spousal benefit
  7. Don't earn too much if you're working in retirement
  8. Delay your divorce
  9. Look into survivor and disability benefits
  10. Strategize

Let's examine each in more detail.

No. 1: Check your record

You can get a good estimate of how much income you can expect to receive from Social Security by setting up a My Social Security* account with the Social Security Administration (SSA).

Doing so will let you see the SSA's record of your earnings, which you should revisit now and then, to make sure they're correct. If they're not, you might end up receiving smaller benefit checks than you've actually earned.

Fixing errors in your record can be an effective way to increase your benefits.

No. 2: Work for at least 35 years

Many people don't realize this, but the formula that the SSA uses to compute your benefits is your earnings in the 35 years in which you earned the most, adjusted for inflation. If you only earned income in 30 years, the formula will be incorporating five zeros, which will shrink your benefits. Aim to work for at least 35 years, if you can.

No. 3: Earn more

Since the formula focuses on your 35 highest-earning years, another way to increase your benefits is to have higher earnings.

Even if you already have worked 35 years, you may be able to increase your future benefit checks by working for a few more years — if you're earning significantly more than you did in the past (adjusted for inflation).

Each additional high-earning year will kick the lowest-earning year the calculation, boosting your benefits.

No. 4: Delay starting to collect your benefits

Another way to increase your Social Security benefits is to delay starting to collect them. You can start as early as age 62 and delay up to age 70. Each of us has a “full” retirement age (typically 66 or 67 these days), and for every year beyond that that you delay, your benefits will grow by about 8%.

Delay from age 67 to 70 and you'll get benefits 24% bigger. The table below shows the effect of starting to collect early (resulting in smaller checks) or late.

For example, if your full retirement age is 67 and you start collecting benefits at 64, your checks will be 80% of what they would have been had you started collecting at 67.

Social Security benefits tableStart Collecting at:Full Retirement Age of 66 Full Retirement Age of 67 
6275%70%
6380%75%
6486.7%80%
6593.3%86.7%
66100%93.3%
67108%100%
68116%108%
69124%116%
70132%124%

Source: Social Security Administration

No. 5: Start collecting early, at 62

If you live an average lifespan, though, you won't come out ahead much by delaying, because you'll get fewer checks, in total, than those who started earlier with smaller checks.

If you live much longer than average, though, waiting will have been worth it. But if you have reason to believe you will live a shorter-than-average life, or you simply need the money, go ahead and start collecting early.

For most people, that's a perfectly reasonable thing to do.

No. 6: Collect a spousal benefit

If you're married and your spouse has a richer work history than you do, you may be able to collect a “spousal benefit,” your spouse's earnings instead of your own. Spouses can collect benefits worth up to 50% of their other half's benefits. This can be particularly welcome for spouses who never worked, or earned very little.

No. 7: Don't earn too much if you're working in retirement

If you're planning to start collecting benefits before your full retirement age and you want to work some then, too, be careful, because your benefits may be reduced.

The Social Security Administration explains: “If you're younger than full retirement age during all of 2018, we must deduct $1 from your benefits for each $2 you earn above $17,040.

” The year you reach your full retirement age, the earning limit jumps to $45,360, and the penalty decreases to $1 withheld for every $3 earned above the limit. Any money withheld isn't lost, though. It's factored into the benefit checks you receive later, which end up increased.

No. 8: Delay your divorce

This won't work for everyone, but if you have been married for less than a decade and are planning to divorce, and if you are able to delay that divorce, doing so may serve you well.

Divorcees may be able to claim benefits their ex-spouse's earnings — even if that ex has remarried — if they were married for at least 10 years.

If your future ex-spouse has a significantly stronger earnings record than you do, you may be able to collect a much bigger monthly benefit check his or her earnings than the one your own record. There are a few more rules related to this, so look into them if this might apply to you.

No. 9: Look into survivor and disability benefits

You may be able to get more money from Social Security than you thought — if you've been widowed or are disabled or related closely to someone disabled.

That's because Social Security offers survivor and disability benefits — and even retirement benefits for dependents of retirees in some cases.

If your spouse passes away, you may be able to claim survivor benefits — and your children may receive them, too, through age 17. Social Security offers disability benefits, also, to people of all ages who qualify.

No. 10: Strategize

Finally, know that there are lots of other strategies related to Social Security that you may be able to employ — especially if you're married.

For example, you and your spouse might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse.

That way, you'll both enjoy some income earlier, and when the higher earner hits 70, he or she can start collecting extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks as his or her own.

Consider consulting a financial professional, too, as a good one might help you better strategize about Social Security, with your gains more than offsetting the cost of the advisor.

If you're able to use some of the ideas above to boost your monthly benefit checks by just $500, you'll gain an extra $6,000 over a year — and $60,000 over a decade. Even greater gains may be possible, as well.

Источник: https://www.aigrs.com/education-center/money-management-basics/10-smart-ways-to-get-more-social-security-benefits

8 Ways to Increase Social Security Benefits

Social Security falling short? Top tips to maximize benefits

Knowing how to increase Social Security benefits is important, since those checks will ly be a major source of your income in retirement.

Unfortunately, many people don’t understand how Social Security really works. They claim too early, miss out on important benefits and fail to use strategies that could boost their lifetime income. Their mistakes can cost them as much as $250,000, researchers have estimated.

Here are eight ways to increase your Social Security benefits.

1. Delay your application

Social Security retirement benefits increase by roughly 7% each year that you delay between the earliest claiming age, 62, and your full retirement age, which is currently 66 and rising to 67 for people born in 1960 and later.

The return you get increases if you can wait beyond your full retirement age. Delayed retirement credits boost your check by 8% for each year you hold off applying until age 70, when your benefit maxes out.

Pro tip: Most people are better off delaying, according to a large body of research that takes into account longer life spans, prevailing interest rates and survivors benefits. Many financial planners encourage their clients to tap other resources, such as retirement funds, if that allows them to put off applying.

2. Work longer

Social Security is a worker’s 35 highest-earning years. You may be able to boost your benefit by working longer if you’ll earn enough to replace one of your lower-paid years with a higher-paid one.

People who took time off to raise families or otherwise had breaks in their employment could find working longer to be especially helpful in increasing their benefit.

(Note that if you start Social Security early, continuing to work could temporarily reduce your benefit.

) Also, a woman’s income may be more ly than a man’s to increase later in life, increasing the potential payoff from continuing to work.

Pro tip: If you start Social Security early, your benefit will be reduced by $1 for every $2 you earn above a certain limit, which in 2019 is $17,640. This earnings test disappears at your full retirement age, so it’s usually best to wait until then to apply.

3. Earn more

Another way to increase your future Social Security check is to max out your earnings as many years as you can.

“Maxing out” in 2019 means you’ve earned $132,900 or more, which is the maximum amount of income subject to the 6.2% Social Security payroll tax.

If you max out in all 35 of your highest-earning years, you’ll qualify for the maximum Social Security benefit at your full retirement age. That’s $2,861 per month in 2019.

Pro tip: Sometimes self-employed people will try to minimize the amount of their income that’s subject to payroll taxes, but that maneuver can come back to bite them when it’s time to apply for Social Security. Paying a bit more taxes in the short run could pay off in a lifetime stream of higher, inflation-adjusted income.

4. Consider your spouse

Some lower-earning spouses could get more from taking a spousal benefit than from taking their own retirement benefit. Spousal benefits can be as much as 50% of what the higher earner gets at his or her full retirement age.

The amount is discounted if either spouse starts benefits early. Typically the higher-earning spouse needs to be receiving a retirement benefit for the other partner to get a spousal benefit.

In the past, higher earners could “file and suspend” to let their own benefits grow, but that’s no longer an option.

When you apply, Social Security will compare your spousal benefit to your own retirement benefit and give you the larger of the two.

In most cases, you won’t be able to switch from a spousal benefit to your own benefit later, even if your own benefit would be larger. (People born before Jan.

2, 1954, do have the option of filing a “restricted application” for spousal benefits only and then switching to their own benefit later.)

Couples should also think about survivor benefits when making Social Security decisions. When one spouse dies, the survivor will start getting only one check — the larger of the two checks the couple was receiving.

The drop in income from the check that’s lost can be substantial. Couples can help mitigate the damage by ensuring the check that remains is as large as possible.

That typically requires having the higher earner put off the start of Social Security, preferably at least until full retirement age.

Pro tip: Coordinating benefits with a spouse can get complicated. Consider using a Social Security claiming calculator to explore your options. There’s a free one at the AARP site, or you can pay $40 for a more sophisticated one at the site Maximize My Social Security.

5. Investigate divorced spouse benefits

If you’re currently unmarried but a previous marriage lasted at least 10 years, you could qualify for spousal benefits your ex’s work record. The amount can be up to 50% of the worker’s benefit at his or her full retirement age. If you remarry, however, the divorced spouse benefit stops. You must be at least 62 to get spousal benefits.

If your ex has died and the marriage lasted at least 10 years, you could qualify for survivor benefits of up to 100% of your ex’s benefit. You can remarry at 60 or older (or 50 and older if disabled) and still receive divorced survivor benefits.

Survivor and divorced survivor benefits can begin at age 60, or at age 50 if the survivor is disabled, or at any age if you’re caring for your ex’s child who is under 16 or disabled (and in that case, the 10-year marriage requirement is waived).

People receiving survivor benefits can switch to their own benefit later if that’s larger, and vice versa.

Pro tip: Your ex must be at least 62 for you to receive a divorced spousal benefit, but does not need to be receiving his or her own benefit. (That’s different from regular spousal benefits, which typically require the primary worker to apply before the spouse can receive anything.

) Survivor benefits are what your ex was receiving or would have received at full retirement age. (If your ex delayed starting benefits past full retirement age, the survivor benefit is increased by those delayed retirement credits.

) If you start benefits before your own full retirement age, however, the amount you get will be reduced.

6. Add your minor child

If you’re receiving Social Security retirement or disability benefits, your offspring may be entitled to a check as well. An unmarried minor child can receive up to 50% of the primary worker’s retirement or disability benefit.

This child benefit typically ends at 18, but can continue to age 19 if the child is still in high school.

Child benefits are also available to those 18 and older if they are disabled and the disability began before the child turned age 22.

There is a “family maximum” that limits how much a family can collect one worker’s earnings record. The maximum is between 150% and 188% of the worker’s monthly benefit at full retirement age. If your total family benefits would exceed the cap, the worker would continue to receive an unreduced check but the dependents’ checks would be proportionately reduced.

Pro tip: Family benefits, including child and spousal benefits, are subject to Social Security’s earnings test and may be reduced or even eliminated if the primary worker starts benefits early but continues to work.

7. Suspend your benefit

If you started Social Security early and decided that was a mistake, you can suspend your benefit once you reach your full retirement age of 66 to 67. That will allow your benefit to earn the delayed retirement credit that increases the amount you get by 8% each year you delay until age 70, when your benefit maxes out.

Suspending your benefit, however, also suspends the benefit of anyone else receiving checks your work history, such as a spouse or a minor child. The potential increase in your benefit may not make up for the loss of your dependents’ benefits.

Pro tip: Sometimes Social Security workers incorrectly tell people they cannot suspend benefits. If that happens to you, refer them to this page on the Social Security website.

8. Use a do-over

If you change your mind within a year of applying for Social Security, you can withdraw your application and pay back everything you’ve received in benefits. That will restart the clock on your benefits so you can receive the 7% to 8% annual increase from delaying your application. You can do this only once in your lifetime, and you can’t withdraw your application after 12 months.

Pro tip: Withdrawing your application is different from suspending your benefit. You can suspend your benefit orally or in writing any time after reaching full retirement age.

To withdraw, you must fill out Social Security Form SSA-521 within a year of applying and pay an amount equal to all the benefits you and your family have received, including any Medicare premiums withheld from your checks.

Источник: https://www.nerdwallet.com/article/investing/increase-social-security-benefits

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