Strategies to Optimize Your Social Security Benefits

To maximize what you can collect, it’s crucial to know when you can file, how delaying filing affects your checks and the income limit if you’re still working.

A happily retired couple dance together on their porch with a great mountain view behind them.
(Image credit: Getty Images)

Social Security has become a saving grace for Americans, especially for retirees. The social insurance program was established back in 1935 and is funded by taxpayers through the Federal Insurance Contributions Act tax.

Around 53 million retirees and their families received benefits in January 2024, according to the Social Security Administration. But, before you can start receiving benefits, there are certain requirements you must meet and understand.

Before you can apply for Social Security benefits, you must have 40 credits built up. But what does that mean, and how do they work? According to the SSA, an employee will earn one credit for each $1,730 made in 2024, and a maximum of four credits can be earned each year.

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However, these credits do not determine what your monthly payment will be. Your payment is determined by the average amount you earned during your working years. So, having more than 40 credits will not increase the payment you receive each month.

When do you become eligible for Social Security?

In addition to the credits, you must also be at least 62 years of age in order to be eligible for Social Security in retirement. You can apply for benefits anytime between the ages of 62 and 70, but the time you choose to claim them has an impact on your payment. Although you can start receiving benefits at 62, you are not entitled to your full benefits until you hit your full retirement age (FRA), which is dependent on the year you were born.

This means you’ll get only a percentage of your benefits until then. For each year you wait, Social Security payments increase by 8% per year. So, a qualified worker earning $2,000 with an FRA of age 67 will earn over $2,500 per month if the worker waits until 70 to claim benefits. Delaying when to claim Social Security benefits can be a huge inflation fighter for retirement.

What to consider before choosing to delay

However, delaying is not always a great idea. There are myriad factors to consider, such as life expectancy, current income status, employment status, your spouse’s Social Security benefits and your family’s health. Maximizing Social Security benefits is not a one-size-fits-all proposition. Some people need to start drawing monthly checks at age 62. Others can afford to wait until age 70 to get that increase of 8% per year of deferral.

Consider Joe’s story: When we first met Joe at our office, he was still employed at age 75 and in great health. Joe wanted to retire within the next few years and needed to make sure all of his ducks were in a row. Unfortunately, the first one, Social Security, was not. Joe thought his check would continue to grow at 8% per year until he retired. The check did grow but stopped increasing when Joe turned 70.

After calling the SSA immediately, he was told his monthly check could begin in the coming months, but since he didn’t file at 70, all of the $2,500 checks he could have been collecting were gone, totaling over $150,000 in lost money. If you know someone who is approaching or has already turned 70, please let them know to reach out to start collecting their monthly Social Security benefit checks.

When to start collecting can be a tricky decision

The ideal time to claim Social Security can be a difficult decision to make. Choosing the wrong time can cost your family hundreds of thousands of dollars. My grandmother Marie chose to collect Social Security when first eligible at age 62. Her benefit was based on my grandfather Bill’s work record, since his monthly check was more than double hers.

If his monthly benefit was $1,000 and hers was $400, my grandmother would have collected her $400 check plus a $100 spousal benefit based on my grandfather’s work record at full retirement age. They both continued to collect their checks until my grandfather passed away at age 79.

At that point, Marie had a choice to continue collecting her check or Bill’s, but not both. She chose to collect his higher monthly benefit check instead of hers and continued to collect it until she passed away at age 91.

Working while collecting Social Security

Here’s a true-or-false question for you: If you continue working and earn too much income, will Social Security keep part of your check forever? The answer? False.

For 2024, the earnings limit to collect Social Security before FRA is $22,320. According to the SSA, if you’re younger than full retirement age during all of 2024, it must deduct $1 from your benefits for each $2 you earn above $22,320.

Many people assume if you earn more than that, you will lose the amount withheld forever. Fortunately, if money is withheld, it will be returned over time and not lost in a vanishing check drawer.

Timing could be everything if your ex-spouse dies

When a spouse dies, claiming benefits can get a bit complicated if there is more than one widow/widower. Famous comedian and late-night television host Johnny Carson is an interesting example here. Carson was married four times. Three of his marriages lasted longer than 10 years, and the other ended after nine years. Now, according to the rules of Social Security, you must be married for at least nine months to qualify for survivor benefits.

An ex-spouse can collect a survivor benefit if married for at least 10 years. Eligible children under 16 can also receive survivor benefits, worth up to 75% of the deceased's benefit. So, three of Carson’s spouses could collect off of his record, but the one married to him for only nine years could not.

As retirees navigate the many complexities of Social Security, these strategies offer valuable opportunities to save on taxes, optimize payments based on personal goals and enhance income security in retirement. Consulting with an independent fiduciary specializing in Social Security timing and utilizing online resources can provide personalized guidance tailored to individual circumstances.

By proactively exploring all the available options, retirees can maximize the full potential of their Social Security benefits and enjoy a more secure retirement.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Jason “JB” Beckett
Founder, Beckett Financial Group

JB Beckett has been an adviser for 24 years and is the founder of Beckett Financial Group, a specialized financial firm that helps individuals and businesses in the Retirement Red Zone build Tax-smart Retirement Income Blueprints allowing them the freedom to overcome their concerns about inflation, market volatility and taxes to retire sooner.