Dear Savvy Senior,
I know that the size of a person’s Social Security retirement benefit is based on how much they earn over their lifetime. But beyond earning a higher paycheck, which isn’t likely for me, is there anything I can do to boost my future Social Security benefits? —Approaching Retirement
Most people think that there isn’t much they can do about the size of their future Social Security retirement checks. But that’s not true. There are actually several strategies that can boost your benefits. Here’s what you should know.
The most common strategy people use to increase their benefits is to delay taking them. While workers can start collecting their Social Security retirement benefits as early as age 62, postponing them to full retirement age (which is 66 if you were born between 1943 and 1954), or better yet to age 70, can make a big difference. Let’s say, for example, that you’re eligible for $1,000 monthly benefit at age 62. By waiting to 66 your monthly benefit would increase to $1,333. And by waiting to age 70, you would boost your benefit a whopping 76 percent to $1760. Waiting beyond age 70 will not increase your benefits.
I do, however, want to add that if you’re strapped for cash or in poor health and don’t expect to live much past your mid-70s, you’re better off collecting early benefits. See www.ssa.gov estimator to calculate your benefits at different retirement ages.
Strategies for Couples
In addition to delaying benefits, there are two strategies that can help married couples too. The first one is the "file-and-suspend" strategy. Here’s an example of how it works: Let’s say that you are age 66, but want to keep working until 70 to collect a higher benefit. Let’s also say your wife is a nonworking spouse who just turned 62 and would like to start receiving spousal benefits on your work record. The problem is she can’t get them until you sign up. So you file for your Social Security benefits but request an immediate suspension which allows your wife to claim spousal benefits, without locking you into a lower payment for life. Then when you do decide to start collecting, by age 70, you end the suspension and receive a higher benefit for delaying. It will also increase your wife’s survivor benefit.
Another benefits-boosting option few people know about is the "claim now, claim more later" strategy. This option lets you draw on your spouses Social Security benefits (once you reach full retirement age), while delaying the start of your own benefits. Here’s how it works: Let’s say that you and your wife are both 66. You’re still working and you’d like to delay collecting benefits based on your own earnings record until you’re 70. Your wife can collect full benefits based on her work record — and you can collect a spousal benefit which is half of what she gets. Then, once you reach 70, you stop receiving the spousal benefit and switch to your own benefit, which will be 32 percent higher than the benefit you would have collected at your full retirement age.
Borrow and Invest Strategy
This is an option for wealthier retirees with other sources of income. How this works is you start collecting early Social Security benefits as soon as you retire, and you save and invest that money. Then at age 70, you file a withdrawal application form 521 at your local Social Security office and pay back the benefits that you’ve received, with no interest or adjustment for inflation. Then you reapply for Social Security, claiming a larger monthly check based on your older age. And, you keep the profits you earned from the benefits you invested. For more information see www.ssa.gov/retire2/withdrawal.htm.
Having children under age 19 who are still in high school can also boost your benefits. Each dependent child is entitled to benefits worth up to half of what you’re collecting. And if any child is younger than 16, your spouse can also qualify for additional benefits as a caregiver.
To learn more about these options visit www.socialsecurity.gov or call 800-772-1213.