The main focus of social security benefits is to provide people with a primary source of income that is not affected by market fluctuations to support them during retirement. These benefits are designed to provide you with security in your later years.
A well-planned social security optimization strategy can help you maximize your retirement benefits. Here are some steps you can take to ensure sufficient income during your golden years.
You Need to Work for At Least 35 Years
According to the Social Security Administration, your benefit amount will be calculated based on your lifetime earnings. Here, the term “lifetime earnings” refers to your 35 highest income years. The SSA calculates your average earnings from the 35 highest income years to evaluate the benefits you will receive at the full retirement age.
If you started working late or were unemployed for a couple of years, those years will be counted as zeros. This will bring your average down, resulting in a reduction in the final benefit amount. So it’s best to ensure that you have worked for at least 35 years. This will not only help you fill your savings account but also helps increase the maximum benefit you’ll receive if you decide to claim at age 62.
Delay Claiming Benefits
Most people know that they will receive their Social Security benefits when they reach full retirement age. But only a few people know that when you delay claiming Social Security, you can maximize your benefits by up to 8% annually. For example, if you don’t claim benefits until you’re 70, the benefit amount will increase by 8% every year.
Use Spousal Benefits
Another way to maximize the social security benefits is to claim spousal benefits first and delay claiming your own.
If you are married, you can claim up to 50% of your spouse’s Social Security benefit. However, this is only possible if your significant other’s benefit amount is higher than your own. You need to sign up for Social Security spousal payments to get the full 50% when you reach retirement age. The payments will be lower if you try claiming them earlier.
For example, if you and your spouse have reached full retirement age, you can claim spousal benefits. This way, you can let your own benefits grow and, if possible, wait until you reach age 70 to take advantage of the increased benefit amount.
Avoid Social Security Tax
Don’t forget about tax when you’re planning to enhance your retirement income. Up to 85% of your Social Security benefits can be taxed based on your income level. Moreover, any income from employment or investments will also be taxed. However, you might be able to avoid paying hefty taxes on your Social Security income by diversifying your income sources.
With expert help and proper planning, you can make the most out of your Social Security benefits and secure your financial future. The team of experienced financial advisors at Hampton Wealth Management can provide you with the resources and knowledge you need to meet your financial goals and enjoy a peaceful retirement. Contact us today!