10 Ways to Maximize Social Security Benefits

Mar 23, 2015

MoneyLife100For most Americans, Social Security retirement benefits typically represent 30 to 60 percent of their retirement income, yet, according to the National Social Security Association LLC, more than 90 percent of Social Security recipients receive less money than they are entitled to. For many, this can represent tens of thousands, or even hundreds of thousands, of dollars in lost retirement benefits.  

The value of monthly payments available through Social Security can be the equivalent of having saved several hundred thousand dollars. Most people would want to seriously consider their options before making a decision about that much money. People shouldn’t tell themselves that it’s ‘only’ such-and-such an amount per month, as the numbers always add up. The Pennsylvania Institute of Certified Public Accountants offers these 10 tips to help you make sure you don’t leave money on the table.

1. Defer Benefits to Age 70

By delaying receipt of benefits from age 62 to 70, you will increase your retirement income payment by 54 percent or more, plus any cost of living adjustments.

2. The Do Over

If you’ve already filed for benefits and wish to undo your election, you can do so up to 12 months from the date you filed. This is known as withdrawing your application. 

3. Start-Stop-Start

If you elected early (age 62), and later decide to defer your Social Security income benefits, you can suspend your benefits as early as age 66. This will allow your benefits to increase by 8 percent per year (known as delayed retirement credits) to age 70, resulting in a 32 percent increase.

4. Increase Your Benefits While Receiving Your Benefits

Your benefits are based on your highest 35 years of averaged indexed monthly earnings. If you continue to work while receiving benefits, and your earnings are higher than any of the previous 35 years of indexed earnings, your benefits will be re-calculated to reflect your higher current earnings.

5. File and Suspend

Once you reach full retirement age, you can elect to “file and suspend” your benefits, allowing your benefits to grow by 8 percent per year, plus cost of living adjustments, to age 70. Since you have technically filed for benefits, although not receiving them, your spouse will be eligible to file for spousal benefits at her full retirement age.

6. File and Restrict

If your spouse has filed for his or her benefits (and you have reached full retirement age), you could restrict your benefit to a spousal benefit and collect 50 percent of the spouse’s benefit amount. Then you could defer taking your own benefit until age 70 in order to earn delayed retirement credits plus cost of living adjustments on your benefits. At age 70, you would switch to your now much-higher benefits. 

7. Spousal Benefits

If you get married, you are eligible for spousal benefits once you have been married for at least one year. At full retirement age, spousal benefits are equal to 50 percent of your spouse’s full retirement age benefit.

8. Survivor Benefits

Once you have been married for at least nine months, you will be eligible for survivor benefits. Once you and your spouse reach full retirement age, survivor benefits will be 100 percent of the deceased spouse’s benefit amount, including any delayed retirement credits. Survivor benefits are available as early as age 60 (or 50 if you are disabled) at a reduced amount. 

9. Divorced Spouse Benefits

If you were married for 10 years or longer, divorced for at least two years, not remarried, and you and your ex-spouse are at least age 62, you will be eligible for ex-spousal benefits, which are similar to benefits you would have received if you were still married. 

10. Divorced Spouse Remarries

If you are divorced and then remarry, you will no longer be eligible for the ex-spouse benefits. However, if you remarry after age 60 and your ex-spouse is deceased, you are eligible for ex-spousal survivor benefits, even if remarried (assuming the criteria noted in No. 9 have also been met).  

The rules governing Social Security income can be very complex. You must take the time to consider the options so that you can maximize not only your benefit but also your spouse or survivors, if needed.

Failing to properly plan Social Security elections can be a huge mistake. If you or a loved one is approaching age 62, it is well worth the time to consider the options that are available to ensure the best choice is made.

Your local CPA can help you understand your Social Security financial issues. Be sure to contact him or her with your questions and concerns. To find a CPA by location or area of expertise, visit PICPA's CPA Locator.

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.