5 Tips to Maximize Your Social Security Payments

Social Security is the largest source of income for Americans age 65 and older. Yet this huge entitlement has many facets, and many are uninformed. Informed decisions about how and when to claim Social Security benefits can mean thousands of extra dollars a year, and tens of thousands of dollars over a lifetime.

This last weekend, I visited with Eric Perkins on the Kare11 Saturday Morning Show to discuss some of the most recent developments that retirees need to know surrounding their social security election benefits as well as several tips on how Minnesota families can best implement intelligent social security election strategies.

Payments for the 60 million families currently on social security have seen a pay increase of 3.6% as of their January 2012 payments. This is the first pay raise since 2009.

Additionally, and probably more importantly from a financial planning aspect, is that the Social Security Administration has resumed mailing benefit statements to workers age 60 and older. The Administration halted these statements last April as a cost saving measure. Thank goodness they reinstated the statements, since the election of your social security benefits is one of the most important decisions that needs to be made as families transition to retirement.

Here are a few savvy social security planning tips which I hope will help you make the best decision for you and your family:

Tip #1: Remember Rule of 35

 First off, you need 10 years of work experience to be eligible for Social Security.  Social Security benefits are based on the average of your 35 highest earning years. If you work longer, you can throw out your lower earning years and boost your benefits.

Tip #2: Wait to Collect

Think of Social Security as another retirement asset, similar to a 401k or IRA. Disconnect your retirement date from your social security election date. The two should rarely go hand in hand. Determine the best way to spend your money to keep living your current standard of living. Should you take 401k money now to delay social security and get a bigger check so you don’t need as much of your 401k later? The majority of retirees still claim benefits as early as they can, at age 62. But just because they can doesn't mean that they should. Do not discount the guaranteed growth that deferring election means to the size of your monthly check. Many folks are surprised to find out that the difference in income from electing social security at age 62 and age 70 is over 75%!

Tip #3:  Collect on Spousal Benefits

Spouses are entitled to a Social Security benefit of up to 50 percent of the higher earning spouse’s check if that amount is higher than the payout based on his or her own working record. Every person who is married is entitled to two benefits. A benefit on his or her own record and benefit under his or her spouse. Usually only the higher benefit is taken. A few shrewd “switching” strategies can enable you to receive a smaller check today off a spouse’s benefit and still allow your benefits to continue growing, only to switch to your own benefits later.  Secured Retirement Advisors has seen this type of strategy make a substantial difference for many of the families we work with.

Tip #4: Collect on your Ex

A former spouse may be eligible for Social Security payments if the marriage lasted at least 10 years. The divorced spouse must be age 62 or older and unmarried. Widows can elect benefits starting at age 60. Utilizing these strategies can allow a single person the ability to use one of those “switching” strategies described above and really make a big impact on lifetime benefits.

Tip #5: Boost the Survivor’s Benefit – Think of We not Me

Finally, surviving spouses are entitled to the higher earner’s full retirement benefit. A worker can increase the monthly survivor’s benefit his or her surviving spouse will receive by waiting to sign up for Social Security later even if they may not personally receive full benefits of deferral. Collecting early can potentially end up shooting the surviving spouse in the foot by taking away a larger survivor’s benefit which would provide more financial security later.

Hopefully these tips are helpful and can help reduce some confusion for you regarding this often confusing and complicated, yet so important, decision. One of my personal goals is to write a book on these strategies, since it is so difficult to share everything you should know given the limited space of this format. If you would like a complementary “3 Step Review” of your own retirement plan and Social Security Benefits, call Secured Retirement Advisors at 952-460-3260.