How to maximize your social security benefits How to maximize your social security benefits

How to maximize your social security benefits

The amount of social security you receive is based on your total lifetime earnings that were subject to Social Security taxes. So, the more money you make over your active years, the more you receive when you retire.

The retirement benefit paid to a beneficiary is based on the result of this SSA Calculation. This calculation is based on a persons’s top 35 years of earnings, adjusted for inflation. The age in which you start claiming for that benefit also plays a part: the maximum payment for a person who starts getting it at full retirement age is $2,642 per month.

You can estimate your future benefit with this useful resource provided by the SSA. 

There are different options as to when to start withdrawing your benefits. The original Social Security Program established 65 as retirement age in which people could start receiving benefits, but in 1983, Congress passed a Social Security amendment that gradually raised the age to 67, so if you were born after 1960, you must reach that age to collect your full benefit.

However, the program offers an early retirement option, beginning one month before you turn 62, provided that you have a minimum of 40 work credits (the amount of money a credit is worth is adjusted annually).

If you choose to retire early, your benefit amount is reduced according to these parameters:

-Up to 36 months early: payment amount is reduced 0.00555% for each month before your regular retirement age. For example, if you were entitled to receive a $1,000 monthly benefit at full age, and decided to retire 12 months early, you would receive $933 (1,000 x 12 x 0.00555).

-Between 37 and 60 months early: In addition to the above, benefits would be further reduced by 0.00417% for each month over 36. Following the same example: if you are entitled to a $1,000, but start taking payments 48 months prior to your regular retirement age, you would get $750 (1,000 x 36 x 0.00555) (1,000 x 12 x 0.000417).

To maximize the total benefit paid over your retirement years, decide when to begin withdrawing Social Security payments. You can base your decision on this information, knowing that the sooner you start getting the payments, the more the benefit is reduced.

Also, you need to consider taxation. As this is usually something tricky, you can follow the instructions of the IRS Publication 915. 

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