Yahoo Finance Social Security: 5 Ways To Maximize Social Security Benefits the Year Before You Retire
Retirement planning retirement savings is an essential part of putting varnish on your golden years. Many people have diversified their retirement savings accounts, relying on 401ks, 403bs and Roth IRAs to boost their savings. However, most Americans still rely on Social Security as a foundation for their comfortable retirement.
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While it’s easy to imagine Social Security as a one-size-fits-all benefit that’s instantly applied to your accounts as soon as you clock out for the last time, there are ways to strategize around how to maximize your Social Security benefits — especially if you start planning a year before retirement.
GOBankingRates talked to Barbara O’Neill, CFP, AFC, CRPC, expert contributor for Annuity.org, a financial professional and author of Flipping A Switch: Your Guide to Happiness and Financial Security in Later Life, to get the scoop on effective strategies. We also checked in with Doug Roller, founder of Crossroads Financial Group.
Let’s dig into how to maximize your social security ahead of retirement.
Check and Verify Your Reported Income
O’Neill said that one of the first things you should do is ensure you report earnings and work history correctly. She advised downloading a personalized Social Security benefit statement to ensure you have 40 quarters of coverage or 10 years of covered earnings. You can use saved W2 forms to verify the data on hand.
Increase Your Income
You might think the year before retirement isn’t the savviest time to ask for a raise or take other measures to boost your income. However, O’Neill reminds you that Social Security benefits are calculated based on a worker’s highest 35 years of earnings — meaning that taking on additional income before retirement gives you higher benefits.
“Income earned in later life after receiving benefits can also help raise payouts if it is greater than earnings as a teenager and/or young adult,” she added.
Have a Withdrawal Plan
One of the most important parts of planning your retirement involves figuring out how you’ll approach potential tax issues related to Social Security.
“Keep in mind that a portion of your Social Security benefits may be subject to federal income tax depending on your total income,” said Roller. “Developing a tax-efficient withdrawal strategy from other retirement accounts can help minimize the impact of taxes on your Social Security benefits.”
Understand Spousal Benefits
There can be great joy in spending your retirement years with a devoted companion. The many benefits to being married during retirement aren’t limited to having someone to stream your favorite shows with — there are significant financial perks as well. Spending the year before you or your spouse retires researching spousal benefits can help you reap even greater benefits.
“If you are married, you may be eligible for spousal benefits based on your spouse’s work record,” said Roller. “Understanding the rules surrounding spousal benefits can help you maximize your overall Social Security income as a couple.”
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O’Neill added that understanding spousal benefits can help you plan more effectively. She said synchronizing when you claim your benefits with when a spouse plans to claim theirs — especially if there’s a significant disparity in career earnings.
“For example, the lower-earning spouse can start benefits between age 62 and FRA while the higher-earning spouse delays benefits until age 70 to maximize benefits for both spouses,” she said.
Look into Your Lifestyle
Single retirees bringing in fewer benefits than a dual-income household also need to show care and precision in planning their retirement. A good place to start is assessing where you can downsize or implement more robust savings, according to O’Neill.
“If income is tight, single individuals may need to consider Social Security benefit-stretching strategies such as downsizing their living space (e.g., a house to condo), moving to a less expensive geographical area, delaying retirement (working longer), or continuing to work after claiming Social Security,” she said.
She added that people might consider taking on roommates or boarders into their homes to pad their income or embracing multi-generational housing.
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This article originally appeared on GOBankingRates.com: Social Security: 5 Ways To Maximize Social Security Benefits the Year Before You Retire
