Knowing how to boost your Social Security benefits is crucial, as those payments will most likely be your primary source of income in retirement. However, there are techniques to maximize your Social Security benefits. Social Security preparation is now a critical component in ensuring financial adequacy in retirement.
How Social Security actually works
According to Investopedia, given today’s lifespan, maximizing your Social Security income is more vital than ever. Consider Social Security as an annuity for the rest of your life, advises Charlotte A. Dougherty, CFP®, founder of Dougherty & Associates in Cincinnati, OH. Not only that, but the federal government backs it, according to David Hunter, CFP®, Asheville, NC-based Horizons Wealth Management, Inc.
Unfortunately, many people are unaware of how Social Security works in practice. They file for benefits too soon, miss out on essential perks, and fail to take advantage of techniques that could increase their lifetime earnings. According to studies, these errors can cost up to $250,000.
Ways to increase Social Security payments
Although numerous strategies for increasing Social Security payments can be complicated and only apply in certain situations, the following are some planning suggestions that everyone should be aware of to boost their Social Security benefits according to nerdwallet.com.
To start with, if you can wait until you reach full retirement age, your return will be higher. Delayed retirement credits increase your check by 8% for each year you wait until you’re 70 to apply when your benefit is at its maximum. Also, to replace one of your lower-paid years with a higher-paid year, you may be able to increase your benefit by working longer. You can also maximize your earnings for as many years as possible. For example, in 2021, “maxing out” implies earning at least $142,800, the maximum amount of income due to the 6.2 percent Social Security payroll tax.
Do not also forget that Spousal benefits can be up to half of what the higher earner receives when they reach full retirement age. If you begin early, you will receive a discount. However, for the other spouse to get a spousal benefit, the higher-earning spouse must typically be receiving a retirement benefit.
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