It Pays to Take Charge of Your Social Security

There’s no better time than now to learn how to take charge of your Social Security. Learning how to maximize your benefits is important for having the retirement you desire. 

Social Security has many complex rules, pitfalls and opportunities that aren’t promoted widely.

Learn how to take charge of your Social Security benefits:

take charge of your social security
  • To qualify for Social Security retirement benefits, workers must be at least 62 and have paid into the system for 10 years or more. Most people in their 50’s in 2020 will qualify for what is called “full retirement age” (FRA) between 66 and 67 based on incremental increases based on your birth date.
  • Workers who wait to collect Social Security, up to age 70, will receive higher monthly benefits.
  • Spouses and ex-spouses may also be eligible for benefits, based on their former partner's earnings record.
  • Deciding on the ideal Social Security strategy for you is a personal decision. Don’t assume your best friend’s strategy is best for you.
  • It’s possible Social Security representatives may give you incorrect advice.
  • There are opportunities to increase your Social Security benefits later if you decide that you started claiming too early.
  • Be proactive. Social Security won't tell you if you become eligible for specific benefits, such as those for divorced survivors and children.

Discover Your Estimated Social Security Benefit Online

The best first step you can take is to go to the Social Security Administration (SSA) website to learn what your Social Security benefit would be once you reach Full Retirement Age (FRA).

The site does this by combining information you provide with your Social Security earnings record from the SSA database.

Here are the steps to take:

1. Go to the official SSA Estimator here: www.ssa.gov/retire/estimator.html.

2. Scroll down and click here: “Estimate Your Retirement Benefits.”

3. You will be directed to a new page. On this page, enter this information:

  • Your name
  • Your other last name (if the one on your Social Security card is different than what you currently use)
  • Your maiden name (if applicable)
  • Your mother’s maiden name
  • Your Social Security Number
  • Your date of birth
  • Your place of birth

4. Before clicking the Submit button, make sure you’ve reviewed their “Terms of Service.” If all is good, check the box that says “I agree to the Terms of Service.” Then click on the Submit button.

NOTE: At this point you might run into an issue between what you believe is your correct information and what the SSA has in its files.

You will be frozen out of the account if there is still a problem after three attempts to submit the information. If this happens, you will need to go to a local office and provide enough documentation to prove your identity to them. (It won’t be easy if you are reading this during the COVID-19 pandemic, but at least look to reach out by phone to get the process moving forward.)

5. On the next screen, locate the field that says “Last year’s earnings,” and fill it out.

Providing the exact number on your tax return is ideal, but your best guess will work if needed. Click on the button that says “Next” once you’ve done this.  

6. You will now see the current estimate of your benefit if you claim it at your Full Retirement Age. It will also show the amount of earnings this estimate assumes you will earn each year until you’ve reached your FRA.

You’ll also see the current estimate of your benefits at age 70 and at 62 with the same earnings assumption. If you are already older than 62, it will show you what your benefit would be if you file now.

7. Print out or save this page on your computer and keep it in your files for easy reference. Don’t worry, it doesn’t show any personal information like your Social Security number.

You can also play around while you’re logged into the SSA Estimator and discover some alternatives based on income and retirement date.

Here are some issues and opportunities to review and consider as you look forward to getting Social Security benefits. There are many others, so it can pay to get professional financial guidance on the best strategies for you.

Don’t Simply Take Social Security Administration Advice at Face Value

The Social Security Administration (SSA) representative you talk to will have good intentions when they offer advice. However, these overworked folks could give you incorrect or incomplete information that may cost you down the road.

You might not be able to correct the mistake later, even if it came from faulty advice from the SSA. This is the SSA’s stated rule on the topic. Many claiming decisions can’t be changed.

It’s also a good idea to also consult with at least one financial advisor after talking with Social Security. Look for one who specializes in retirement planning to confirm and get a complete picture of your options.

You Can Withdraw Your Social Security Application

You can withdraw your application and repay all the benefits you’ve received so far. This only works if you’re within the first 12 months of claiming and you have enough cash available. 

If you do, then it is like you never claimed in the first place.

Lots of people file for Social Security without fully understanding the consequences. For example, many people choose to claim Social Security before full retirement age, but later wish they had not done so.

After repaying what you received, you can claim a tax refund or credit for any taxes you paid on those benefits.

Suspend Your Social Security Benefits

Let’s say you chose to get early retirement benefits at age 64 and don’t need the money now after all. Once you reach full retirement age, you can voluntarily suspend your Social Security benefits.

Doing so will boost your future benefits—and you don’t need to repay the benefits you’ve already received.

Let’s say you file to voluntarily suspend your benefits at your full retirement age 66 (“full retirement” can be different for different birth dates). For each month of suspension, you will earn delayed retirement credits worth 2/3 of 1% per month—or 8% per year.

Maximize Your Household Benefits

social security family

An individual with a spouse or minor children should consider how your claiming strategy affects them. This might mean using a different benefit strategy than the one you’d use to maximize your own benefit payment.

Your claiming decision affects family members. If you voluntarily suspend your own benefits, no one else can receive Social Security benefits based on your earnings record.

How else could you maximize your household’s Social Security benefits? The usual advice is to postpone claiming until age 70 if you can afford to do so. However this may not be the best option if you’re in your 60's and still have minor children at home.

You might receive more benefits in this situation by claiming at a younger age so you can receive dependent benefits.

The dependent child benefit is equal to half of the claiming parent’s full retirement benefit. The younger spouse may also be eligible for a spousal benefit. These additional benefits may offset the lower benefit you receive by filing early.

You can see how your specific family situation can factor into determining the best path forward. Get professional advice. It could add thousands of dollars over your lifetime.

Take Charge of Your Social Security by Knowing Every Benefit You’re Entitled To Have.

The Social Security Administration doesn’t just pay retirement benefits directly to the worker who earned them. It also pays:

  • survivor benefits
  • divorced survivor benefits
  • spousal benefits
  • divorced spousal benefits
  • child benefits
  • and a few others

Social Security doesn’t always inform individuals when they become eligible for these benefits. This means you could miss out on benefits if you aren’t proactive.

Here’s an important item that impacted me personally. The survivor/widow/widower's benefit and the worker’s benefit are treated as two separate benefits.

A person losing their spouse before retirement may be able to receive a survivor benefit first. Then they could switch to their own retirement benefit later, or vice versa.

Imagine one spouse is still working and the worker benefit after deferral credits exceeds the survivor benefit. They could claim the survivor benefit at full retirement age and switch to the worker benefit at 70.

Beware the Social Security Tax Torpedo

Social Security may be a long-awaited retirement perk, but it’s not without its issues and complications. You need to take charge of your Social Security and other retirement income well to avoid the “tax torpedo.”

taking charge of their social security

The tax torpedo is a name given to the unusual way Social Security can get taxed, depending on how much other income you have.

The tax torpedo can sneak up on people and most folks don’t understand if or how Social Security can be taxed.

Because the income amounts subject to tax aren’t indexed for inflation, many retirees are being hit with in the tax torpedo as baby boomers are moving through retirement.

Social Security and Retirement Can Be a Taxing Time

About half of retirees don’t need to worry about taxation of Social Security benefits because their income is too low.

But those with more income could have a portion of their Social Security taxed as they pass certain thresholds. Social Security isn’t taxed when provisional income is less than $25,000 for individuals ($32,000 for married couples filing jointly).

When income is between $25,000 to $34,000 ($32,000 and $44,000 for married filing jointly), 50 percent of Social Security income is taxable. When provisional income is above those amounts, 85 percent of Social Security is taxable.

Provisional income is calculated by taking your modified adjusted gross income and adding half of the Social Security benefits received.

The tax torpedo typically comes at age 70½ , when the required minimum distribution from tax-deferred 401(k) plans and individual retirement accounts kicks in.

So it pays to educate yourself – and include a discussion about Social Security when you meet with a financial planner.

The Bottom Line - It Really Does Pay to Take Charge of Your Social Security

Social Security benefits are an essential part of any retirement plan. You’re entitled to them if you or your spouse have earned 40 credits by paying into the system for at least 10 years. You should absolutely try to max out your payback within the rules of the program.

That’s why it’s essential to educate yourself about the available benefits and filing strategies. Work out the various scenarios with a financial planner and a Social Security calculator before actually filing.

With this knowledge in hand, you’ll be able to claim your benefits in a way that’s most likely to provide the maximum return for you and your household.

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