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Maximizing your Social Security Payments

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This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

Most elderly people rely on Social Security payments for a significant portion of their income. In some cases, it can be as large as 90%. But too many people don't think about how to maximize their eventual Social Security payments. For the majority of people, this is easier than you might think.

The Basics

In case someone reading doesn't know how it works, here are the basics. With every paycheck, you pay Social Security taxes. Every three months that you work, you earn a Social Security credit. If you amass 40 of these credits, or 10 years of working, you become eligible for Social Security.

As you keep working and putting money into the system, your eventual payout will grow. By the time you reach retirement age, the amount you've put in for the top-earning 35 years of your life becomes the basis for your final payment amount.

Thus, the simplest way to maximize your payments is to earn more money. The more you pay in Social Security taxes, the more you'll get in the end. If you're curious about how much you've earned so far, you can go to ssa.gov and sign up for an account to check your current status.

Retirement Age

Jason Baril, attorney and co-founder of Ogle, Erold & Baril PLLC, says that "Most people know about 401ks and Roth IRAs, but having one - or both - of those doesn't mean you should forget about your Social Security payouts. These payouts form the bedrock of any retirement plan, so you need to make sure you know how they work. Take steps to stay informed so that you'll know if something isn't right and will know the steps to take to rectify any problems if they arise."

If you were born past 1960, then the retirement age for Social Security is 67 years old. However, you can start claiming Social Security anytime between ages 63 and 70. If you take your payments before retirement age, you will receive smaller payments for the rest of your life. The earlier you take it, the smaller the payments. If you take it at retirement age, you'll get the expected amount. However, if you delay it then you will get a significant 8% yearly increase at the time of this writing, which can make your payments about 125% of what you would have gotten had you not deferred.

It's a complicated decision. On the whole, however, the amount of money you get should balance out over your expected lifespan. Thus you don't really lose or gain money if you claim early or late unless you live significantly longer than expected. The choice of whether to claim early, when suggested, or late should be done with great care because you can't change your mind once you've started taking benefits. A talk with a Social Security lawyer can be a great benefit to see your options. There are also Social Security calculators on the web that can give you estimated payments.

Marriage

Marriage significantly complicates the number of options for Social Security payments, especially if one spouse earned significantly more money than the other spouse. In addition to the three options above, you now have additional choices to claim spousal benefits or survivor benefits if your loved one is deceased. You can switch between your benefits, spousal benefits, or survivor benefits, but they don't stack.

Sometimes it is beneficial to take spousal benefits while deferring your personal benefits until a later date so you get a larger payout. Or if you're not married and haven't earned much, you could marry someone with more wealth and get a larger spousal benefit than your current amount. If you were married to someone for at least a decade and then divorce, you can also claim benefits on your ex. It can get complicated fast! Thus, if you are married or were married for over a decade and now divorced, seeing a Social Security lawyer is in your best interest to plan the best route to maximize your payments.

There also used to be some sneaky ways to really boost your payments that have now been closed. If you see references to the "file and suspend" strategy or the "restricted application" strategy, those will no longer work.

Until you start reaching your 60s, the best way to maximize Social Security is to earn as much as you can and keep working. But once you hit your early 60s, it's time to talk to an accountant or lawyer familiar with Social Security to see when to start claiming this important benefit.


This article was written by Adam Monson for on .

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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