How To Increase Social Security Retirement Benefits

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The Downside Of Claiming Early: Reduced Benefits

Increase Your Social Security Benefit During Retirement

Consider the following hypothetical example. Colleen is 62 as of 2022. If Colleen waits until age 67 to collect, she will receive approximately $2,000 a month. However, if she begins taking benefits at age 62, she’ll receive only $1,400 a month. This “early retirement” penalty is permanent and results in her receiving 30% less year after year.

However, if Colleen waits until age 70, her monthly benefits will increase another 24% over what she would receive at her FRA, to a total of $2,480 per month.1 If she were to live to age 89, her lifetime benefits would be about $112,000 more, or at least 24% greater, because she waited until age 70 to collect Social Security benefits.2

Will Social Security Get A $200 Raise In 2021

In order for a 5.9% increase to result in an extra $200 per month in benefits, you would have needed to have received at least $3,389 per month in 2021. … This figure changes from year to year to adjust for inflation and is the the amount on which the SSA calculates the maximum Social Security benefit.

Your May Have To Pay Taxes On Social Security Benefits

Most people know that Social Security is funded by a tax on earnings, currently 6.2% for the employee . But some retirees dont realize that you may well have to pay income tax on Social Security benefits when it comes time to claim them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits havent been increased since then.

It doesnt take a lot of income for your Social Security benefits to be taxed. Your benefits wont be taxed if your provisional income is less than $25,000 if youre single or $32,000 if youre married. If youre single and your provisional income is between $25,000 and $34,000, or married filing jointly with provisional income between $32,000 and $44,000, up to 50% of your Social Security benefits may be taxable. If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, up to 85% of your benefits may be taxable.

The Social Security Administration says about 40% of beneficiaries pay taxes on their benefits. Since the thresholds arent adjusted for inflation, the number of beneficiaries who pay taxes on Social Security benefits increases every year. The Social Security Trustees annual report estimates that taxes on Social Security will total $45.1 billion in 2022, up from $34.5 billion in 2021.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

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Options To Adjust Benefits

  • Change the amount that retirees can receive when they first apply for benefits. Many proposals combine a reduction in benefits for high earners with an increase in benefits for lower earners.
  • Slow the growth of retirees benefits over time by changing the cost-of-living index. Many economists believe that Social Security currently uses an index that overstates inflation, so benefits grow faster than the true cost of living. They propose replacing the current index with chained-CPI, which is a more accurate measure of inflation.

How To Get The Maximum Social Security Benefit

Delaying Social Security Retirement Benefits

The maximum Social Security benefit in 2022 is $4,194 per month or $50,328 for the year. Most people do not get that much, though. To get the maximum you would have had to postpone benefits until age 70. You also would need to have earned the maximum taxable amount for at least 35 years. For people who start receiving benefits at full retirement age , the maximum amount in 2022 is $3,345. That said, the average Social Security check as of July 2022 is $1,670.95. To make sure you have enough in retirement to maintain your current lifestyle, consider talking to a financial advisor.

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Claiming Social Security Benefits At The Right Time Means More Money In Your Pocket Heres A Guide To Everything From Knowing Your Full Retirement Age To Taking Social Security Spousal Benefits

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When youre years away from retirement, Social Security seems straightforward: Youll leave your job, file for benefits and receive a monthly check for the rest of your life boom! But in reality, getting the most out of Social Security is anything but simple. As you near retirement, the decisions you make could have a significant impact on the amount of money you receive, and some of these choices are irrevocable. Youll need to move carefully to maximize this income stream.

Here are 12 essential details you need to know.

Work For At Least 35 Years

The Social Security Administration uses your 35 highest-earning years to calculate your primary insurance amount , which is the monthly benefit amount you receive as of your full retirement age. If youâve worked fewer than 35 years, Social Security uses zeroes in the calculation for the non-earning years.

That means beneficiaries with fewer than 35 years of income can make a big difference in the size of their benefit by continuing to work and getting some of the zeroes replaced with positive income numbers.

Brotman also suggests strategically increasing your yearly income, if possible, to help maximize your future benefits.

âThe first $142,800 of income is subject to Social Security taxation and also used to calculate future benefits,â he notes. âIf you are earning less than that figure, consider a second job or side hustle to increase your contributions into the system and youâll be setting yourself up for a larger future benefit.â

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Is Social Security Based On The Last 5 Years Of Work

Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or indexed to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.

Strategies To Boost Your Benefits

Social Security benefits increasing in 2022

There are steps that you can take that will go a long way toward helping you maximize your Social Security retirement benefits. You can use a combination of some of the following strategies, some of which have eligibility requirements:

  • Work for 35 years
  • Check Social Security statement for mistakes
  • Stop collecting benefits temporarily

Please note that the Social Security Administration periodically increases Social Security benefits called a cost-of-living adjustment , which adjusts for rising prices . In 2022, Social Security and Supplemental Security Income beneficiaries will receive a 5.9% COLA. On average, a retired worker who earns $1,565 per month before the COLA will earn $1,657 monthly in 2022 after the COLA.

Below are the nine ways to help boost Social Security benefits.

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Maximize Your Income With A Social Security Payout Increase

One out of five people in the U.S. receives Social Security payments. While many of these people are retired, others have permanent disabilities or are dependents of workers who have died. Social security was created as a safety net for workers and their survivors.

Social security provides income that increases with inflation. Even a small increase in your initial benefit will result in a larger payment each year after you retire. Taking certain actions now and later will allow you to increase the amount of Social Security benefits you will receive, which can help boost your financial security in retirement.

How Do I Estimate My Monthly Retirement Benefits

You can estimate your monthly retirement benefits by calculating your PIA, the monthly benefit youre eligible to receive once you reach your FRA. To determine your PIA, the Social Security Administration uses your best 35 years of employment to arrive at your Average Indexed Monthly Earnings . If you havent worked for 35 years, some of the included earnings may be zero.

If you continue working after reaching your FRA, the SSA will automatically recalculate your benefits each year you continue to work. If your current income is greater than any of your previously calculated best 35 years, your benefits will be adjusted upward. The increase generally will be made in October of the following year but will be retroactive to January 1.

Social Security retirement benefits are automatically modified each year for cost-of-living adjustments , which are either positive or zero never negative. COLAs are based on the Consumer Price Index and have averaged between 1% and 2% over the past 10 years.

For more information, the SSA offers a helpful Social Security retirement calculator.

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Retire Early Get Less Retire Later Get More

In 2000, Congress raised the full retirement age to help offset the financial costs of increasing life expectancies among Americans.

For those born in 1937 and earlier, full retirement remains at age 65. However, for those born after 1937, the full retirement age increases incrementally until those born in 1960 and after will have to wait until age 67 to receive full benefits.

Despite this, anyone who has paid into the system for at least 10 years can start receiving benefits as early as the first full month after reaching age 62. However, accessing benefits at 62 will permanently decrease the amount you may receive each month by 20 to 30 percent. Conversely, if you delay taking benefits past your full retirement age, your monthly benefits will increase until you turn 70 and reach the maximum benefit amount.

The decision to receive Social Security benefits before full retirement age is contingent on individual circumstances. Even the month in which you choose to begin benefits may make a difference. In addition, other benefits may be available if you are eligible. Not everyone has the financial flexibility to defer Social Security benefits, but if youre considering it, you must compare the advantage of increased monthly benefits against the cost of receiving benefits for fewer years.

Apply For Social Security Survivor Benefits

How Does Social Security Work? Top Questions Answered

You may also be able to increase your monthly retirement paycheck using Social Security survivor benefits.

âIf youâre widowed and your deceased spouseâs benefit was higher than your retirement benefit, you are generally able to claim the higher of the two,â says Brotman.

Experts recommend higher-earning spouses wait as long as possible to claim benefits, since it can prepare a lower-earning spouse for a bigger benefit as a widow or widower. Unlike spousal benefits, which are based on the unadjusted PIA and when the nonworking spouse chooses to start benefits, survivor benefits are determined by the amount the earning spouse actually received if they die after starting benefits.

âWhen a couple is collecting benefits and one spouse dies, the surviving spouse typically receives the higher of the two benefit payments moving forwardâbut not both,â says Brotman. âThat means youâll want to consider age disparity, life expectancy, the health of each spouse and the benefit amounts available for each spouse to try to maximize your benefits, both while youâre both living and when one of you is widowed.â

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Watch How Much You Earn In The Years Preceding Full Retirement

The SSA has imposed earning limits for individuals who have entered early and full retirement. Those limits, and the impact on your earnings, depend on how close you are to your full retirement age.

In 2022, an early retiree can make $19,560 in gross wages or net self employment earnings without penalty. Any overage will result in $1 deducted from the Social Security check for every $2 earned above this amount. Once you reach the year of your full retirement age, you can bring in $51,960 prior to the month of your full retirement birthday without penalty. For every $3 earned above this amount, the SSA will deduct $1 from your Social Security payment. These limits also affect the amounts family members can receive from your claim.

Once youve reached full retirement age, earnings do not impact your benefits.

Benefits For Your Spouse Or Common

Allowance

If you are eligible to receive the Guaranteed Income Supplement, your spouse or common-law partner may be able to receive the Allowance if your spouse or common-law partner:

  • is 60 to 64 years of age
  • is a Canadian citizen or a legal resident
  • resides in Canada and has resided in Canada for at least 10 years since the age of 18

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How To Boost Your Social Security By $10000 Per Year

The average benefit amount as of August 2022 is around $1,673 per month, according to the Social Security Administration.

Say, for example, you have an FRA of 67 years old, and by filing at that age, you’d receive $1,673 per month. If you began claiming at age 62 instead, your benefit amount would be permanently reduced by 30%, leaving you with around $1,171 per month — or $14,052 per year.

On the other hand, if you delay benefits until age 70, you’d receive your full benefit amount plus an extra 24%. That amounts to around $2,075 per month, or $24,900 per year. In total, that’s $904 per month more than you’d receive by filing at age 62.

Age You Begin Claiming

When Will The Social Security Administration Announce The Cola Increase For 2023

How much could Social Security benefits increase in 2023?

The 2023 COLA is determined by data reported in the Consumer Price Index for July, August and September 2022.

The US Bureau of Labor Statistics typically releases CPI information in the second week of each month: On Sept. 13, for example, the agency reported inflation information for August, which was at 8.3%, a continued decline from July’s 8.9% and June’s 9.1%. The CPI for September will be announced on Oct. 13.

Last year, the 2022 COLA increase was announced the same day as the CPI. If that holds true this year, we should know how much next year’s Social Security benefits will increase on Oct. 13, 2022.

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How Do You Become Eligible For Social Security Benefits

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn up to four credits each year, so it takes 10 years of work to qualify for Social Security.

In 2022, you must earn $1,510 to get one Social Security work credit and $6,040 to get the maximum four credits for the year. And yes, that means that it is possible to have money withheld for Social Security and never get it back. The minimum is the minimum.

Find Your Social Security Full Retirement Age

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. But first you have to know what it is.

Also known as normal retirement age, your Social Security Full Retirement age is the age at which youre entitled to 100% of the Social Security benefits youve earned. FRA is 66 for beneficiaries born between 1943 and 1954 it gradually increases to 67 for beneficiaries born in 1960 or later. If you take benefits before FRA, your benefits will be reduced. If you file at age 62, for example, benefits will be as much as 30% lower. More on that in a moment.

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Work Until Full Retirement Age

Another step you can take to maximize your Social Security benefits is to work until your full retirement age . Originally, this number was set at 65. But it has been steadily creeping up, thanks to the passage of the Social Security Amendments of 1983 . Starting in 2000, the full retirement age has been increasing in two-month increments so that its 67 for people born in 1960 or later.

If you dont wait till your FRA, the earliest you can start receiving Social Security is 62 years old. However, your benefit will be reduced by up to 30% if your FRA is 67 in this case.

Sign Up For Spousal Benefits

Raising Social Securityâs Retirement Age Cuts Benefits for All Retirees ...

If you are married and have little earned income, you may be entitled to spousal benefits of up to 50% of your partners eligible amount. If youre at least 62 years old and have a child in your care, you may be eligible to receive benefits through your spouse. The spousal benefit can be as much as 50% of the partners benefit, depending on when the partner retires.

Even divorcees are eligible. In fact, both parties in a divorce can claim spousal benefits based on the other spouses Social Security earnings. However, if you have remarried, you cannot collect your ex-spouses benefits.

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How Will My Retirement Benefits Be Taxed

Approximately one-third of people who collect Social Security benefits are required to pay income taxes on these benefits. Individuals with higher total incomes must include up to 85% of their benefits as income for federal income tax purposes, designated by special step-rate thresholds. However, the taxation thresholds for your benefits arent currently indexed for inflation.

Theres A Social Security Spousal Benefit

Marriage is rewarded when it comes to Social Security. One spouse can take whats called a spousal benefit, worth up to 50% of the other spouses Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouses own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 bringing in $500 more in income per month.

Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

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