How to Maximize Your Social Security Benefits

Written By Mary Beth Eastman
Last updated December 8, 2020

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April 23, 2019

Simple. Thrifty. Living.

About 62 million Americans receive Social Security benefits. The amount that each person receives, however, depends on several factors. If you want to maximize your Social Security benefits, then you need to know a few steps that will help you get more money during your retirement years.

The more money that you earn during your career, the more you will pay into Social Security. The government looks at the 35 years that you earned the most money when setting your benefits. If you haven’t retired yet, do everything you can to make more money at work. Doing so will lead to more money during retirement.

If possible, wait until you turn 70 before you accept any Social Security benefits. By waiting, your monthly payments will increase by 8%.

If you have to retire because of a sickness or injury, you should wait until you reach full retirement age. Technically, you can start taking benefits at 62. Accepting early benefits, however, will reduce the amount of money you get.

Currently, the government considers 66 or 67 the full retirement age, depending on when you were born. Expect the age of retirement to increase in upcoming years, though.

A lot of people continue to work after they retire. About 35% of those people say that they keep working because they need the money.

Avoid earning too much cash during retirement, though, or you may lose some of your Social Security benefits. In 2019, people who start taking Social Security benefits early can only make $17,640 per year before they get penalized. Early retirees lose $1 of Social Security money for every $2 they earn above $17,640.

Those who wait until full retirement age have more opportunities to earn money. If you don’t retire until you reach 67, you can make $46,920 per year without penalties. Once you cross $46,920, though, you will lose $1 of Social Security money for every $3 you earn.

Another option for your golden years is to lean on the investments you make while younger. Compound interest can make an online IRA opened today be worth more when you retirement. Plus, if you qualify for and open a Roth IRA, your withdrawals in retirement will be tax-free, because contributions are made with after-tax dollars.

The Social Security Administration pays you benefits, but the IRS can tax the money you get. In 2019, couples don’t have to worry about excessive taxes as long as they make less than $44,000 per year. For individuals, it’s $34,000.

If you make more money than those amounts, the IRS could tax up to 85% of your Social Security benefits.

Before you retire, sit down with a financial planner to find strategies that will help you maximize your benefits and income while avoiding taxes. Each person has a unique situation, so it makes sense to talk to a professional.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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