10 Ways to Get the Most Out of Social Security Benefits

By: Edward A. Zurndorfer, Certified Financial Planner


Here are 10 suggestions for individuals to get the most of their future Social Security retirement benefits.

1. Do not start taking Social Security retirement benefits too early

While a "fully insured" individual -- someone who has at least 40 credits of Social Security -- can elect to receive their Social Security retirement benefits as early as age 62, it is advantageous to delay the start of one's retirement check to at least their "full retirement age"(FRA). If economically possible, perhaps delaying the start of retirement benefits until age 70. By waiting to start receiving their benefits, the benefits keep increasing each year, as illustrated in the following example:

For someone born between 1943 and 1954 and whose FRA is age 66, a $15,000 annual benefit at age 62 would be a $20,000 annual benefit at age 66. If the individual delays the start of benefits until age 70, the annual benefit would be $26,400.

For federal annuitants, it would perhaps make more sense to draw down their Thrift Savings Plan (TSP) or IRA balances in order to allow them to postpone collecting Social Security retirement benefits.

2. There is no "marriage penalty" when it comes to Social Security

Contrary to a common misconception, there is no "marriage penalty" or "offset" when it comes to Social Security. When both spouses are entitled to Social Security benefits, each spouse can collect full benefits. However, there is an alternative if one spouse earned much more than the other spouse. Under the dual entitlement law, the spousal benefit is set at 50 percent of the higher earning spouse's benefit amount. For example, if a higher earning spouse is getting $30,000 a year in Social Security benefits and the lower earning spouse's benefits would be $10,000 a year, then the lower earning spouse is entitled to 50 percent of the higher earning spouse's benefits, or $15,000 a year.

3. Social Security has death benefits

When a higher earning spouse dies, the surviving spouse receives a "widow/widower" benefit equal to 100 percent of the deceased spouse's Social Security benefit. If the deceased individual at the time of death had children younger than 18 years of age, then each child is entitled to a death benefit equal to 75 percent of the deceased parent's monthly Social Security benefit.

The widow/widower benefit continues until the widow/widower dies. The children's benefit continues until the child becomes age 18 or age 19 if the child is still in high school.

4. It is possible for a lower earning spouse to collect early and then switch to a higher benefit later

In the case of a married couple in which there is a lower-earning spouse and a higher-earning spouse, the higher earning spouse can file for benefits at their FRA and then immediately request not to receive their monthly benefit. This allows their benefit amount to continue to increase at 8 percent per year until age 70. This individual can continue to work and earn a higher income, resulting in a larger Social Security retirement benefit once the benefit starts. The higher earning spouse "filed and suspended" the benefits, allowing the lower earning spouse to retire and start collecting the spousal benefit of the higher-earning spouse. The lower earning spouse will collect the spousal benefit, equal to one-half of the higher earning spouse's benefit amount. Once the lower-earning spouse reaches FRA, they can switch to their retirement benefit if it is larger than the spousal benefit.

5. Maximizing one's earnings before retirement can lead to larger Social Security benefits

The Social Security Administration calculates an individual's benefit amount in retirement by averaging the top 35 years of earnings during the individual's working life, after adjusting earlier years for inflation. What this means is that each year over 35 years an individual earns a larger salary compared to a salary earlier in their working career, the previous lower earning year is deleted from the calculation, leading to a higher overall average. This is perhaps another good reason for federal employees to work longer and earn higher salaries.

6. A widow/widower can start collecting Social Security spousal benefits on the deceased spouse's account at age 60

The amount of a widow/widower benefit will be reduced by a small amount for each month before the widowed spouse's actual retirement age of 62. After age 62, the widow/widower may switch to his or her own account. The best time to switch can be complicated and the Social Security Administration advises such people to consult with a Social Security representative before making such a decision.

7. Social Security Income and the Law

Social Security income is protected by law from most creditors, but not debts owed to the IRS, federal student loans, other federal government claimants, from alimony or child support payments.

8. Social Security income is taxed at less than other income

Single individuals with adjusted gross incomes less than $25,000 or married couples whose adjusted gross incomes are less than $32,000 do not owe federal income tax on their Social Security benefits. Above these income thresholds, the portion of Social Security subject to federal income tax increases to 85 percent of the total benefits. However, since qualified distributions from a Roth IRA and Roth TSP are not included in income, it can be advantageous to start withdrawals from non-Roth retirement accounts before starting to receive Social Security benefits, holding off on Roth withdrawals until one starts collecting Social Security benefits.

9. Marriage and Social Security

Individuals who divorce after 10 years of marriage and then remarry normally cannot receive the ex-spouse's Social Security retirement benefits at a later time. However, there is an exception - individuals who remarry after age 60. This means that a divorcee who is serious about marrying an individual who has less Social Security benefits than their ex-spouse's benefits should delay their nuptials until they are over 60 year old. In so doing, they can collect spousal benefits during retirement of 50 percent of their ex-spouse's benefits, 100 percent of the benefit if the ex-spouse is deceased.

10. Higher earning spouses should delay collecting for the sake of the lower earning spouse

If the higher-earning spouse retires early, he or she locks in a lower retirement benefit amount. If they die, their spouse will receive this locked-in amount for life. On the other hand, if the higher earning spouse does not retire early but dies before reaching FRA and before filing for their Social Security retirement benefit, then the surviving spouse will nonetheless receive a widow/widower's benefit of whatever the deceased (higher earning) spouse's benefit would have been at full retirement age.

About the Author

Edward A. Zurndorfer is a Certified Financial Planner, Chartered Financial Consultant, Chartered Life Underwriter, Registered Health Underwriter, Registered Employee Benefits Consultant and Enrolled Agent in Silver Spring, MD -- and the owner of EZ Accounting and Financial Services, an accounting, tax preparation and financial planning firm also located in Silver Spring, MD. Zurndorfer is also is an instructor at federal employee retirement seminars throughout the country and writes numerous columns and books on federal employee benefits.

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