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How to Claim an Extra $130,000 in Social Security

Marc Lichtenfeld, Chief Income Strategist

Social Security is surprisingly more complicated than just collecting your monthly $1,461 from the government (the average payout in 2019, according to the Social Security Administration, or SSA).

On the plus-side, you can use a variety of strategies and maneuvers to increase that amount. On the downside, there are also obstacles: things most people don’t tell you about that can actually reduce your monthly income amount.

It’s therefore important to understand how your Social Security is calculated…

The first step to collecting more is working for a full 35 years. If you don’t have that much built up in work income, zeros will be used in those non-working years when making the average calculations. And your checks will be lowered.

Consider this example: Jill earned annual average earnings of $50,000 for 35 years. Jack earned the same average, but in three of those years, he had no income due to layoffs. As a result, his average earnings were actually $45,714 – almost $4,300 less than Jill, even though he earned the same wage. If he works three additional years at $50,000, he will have a full 35 years of earnings, and then his average earnings would rise to $50,000 annually.

Your Social Security benefits are based on your top 35 years of work. Those wages are then restated to reflect wage growth. Next, the restated numbers are averaged and divided by the number of months in 35 years. This number is then applied to a formula to determine what’s owed at the full retirement age of 66.

You can use a calculator on to determine your proper payment. This will give you a good idea of how much to expect… Though don’t stop there.

There are some steps you can start taking right now to maximize your Social Security income, both if you’re still working and if you’re already in retirement.

Does Social Security Owe You An Extra $10,212 Per Year?

Once you’ve worked a while, retirement comes into sight. The earliest you can file for Social Security benefits is age 62. And while it’s tempting to start collecting money right away… waiting is well worth it. You’ve worked hard all your life and paid your dues. It’s now time to maximize what you get in return.

In 31% of cases, medical issues require some folks to take as early a retirement as possible: They have no choice. But the rest of us do. And in virtually every case, it literally pays to hang on for a few more years, at least until you hit full retirement age.

Still, the majority of people file for benefits at age 62, and many do it out of fear that the money won’t be there down the road.

From my perspective, the political cost of disturbing this particular applecart is so high that I’m certain the government won’t try taking it away any time soon. In fact, I believe Social Security is as close to a guarantee as we get in this life.

But if you still think it’s OK to check out of the work world as early as possible, here’s another reason to put it off…

Let’s assume that you retired in 2019 at age 66, and received the highest benefit payout allowed. Your monthly checks would be $2,861. However, if you put off collecting social security for four years and began at age 70, your monthly benefit payout would be $3,770.

The difference comes to $909 per month, or $10,908 a year.

By simply using a “do nothing strategy” and waiting until you reach age 70, you add an extra 32% to your monthly benefits.

If you use the maximum payout numbers at age 70, compared to what the average person is receiving, the cumulative numbers are even more startling. Your monthly payment of $3,770 amounts to $45,240 a year.

By contrast, the average monthly Social Security payout last year was a much more modest $1,461, or $17,532 a year. That’s a huge difference…

$3,770 – $1,461 = $2,309.

$2,309 x 12 = $27,708 annually!

Over a lifetime of payments during your retirement that’s a gigantic sum…

If you start collecting the average payout of $1,461 a month at age 62 and live until your 79.5 (the average life expectancy in the US), that means you will be collecting payments totaling $306,810.

On the other hand, waiting until 70 and receiving the maximum payout of $3,770 until 79.5, you’ll get a total of $429,780.

That’s an extra $122,970 in Social Security payments!

And it’s certainly not unusual for people to live until they are 90 or 95 these days.

From my point of view, the total cost of claiming your benefits too early are so great that virtually no one should consider it.

The 20 or 30 years of unemployment – which is what retirement really is – can drain even the best-funded retirement accounts. The majority of people who choose to leave the work world at first chance need a major reality check.

Two to three decades is a long time. Think long and hard before you pull the trigger on this one. Health and money allowing, you should not apply for benefits until age 70.

And keep in mind that the higher your salary is going into retirement, the more substantial these differences will be. Before you jump at the chance to start receiving money as soon as possible… do the math. See what waiting a few years will do to your payments.

Triple Your Spousal Benefits

I said I would share a legal way to triple a portion of your Social Security income… and this is it. It’s all about how you handle your spousal benefits.

Even if you’ve never worked under Social Security, you may be able to get spousal retirement benefits if you’re at least 62 years of age and your spouse is receiving retirement or disability benefits.

Though, as with your own, it pays to wait to file here. Spousal benefits are one-third the amount if you take them out at 62. But if you wait until 70, the amount will be three times larger.

Add an Extra $1,343 to Your Monthly Income From Your Ex-Spouse

Social Security is a retirement asset many people forget about during divorce. That’s because there’s nothing to split.

But there is something to claim.

If the marriage lasted 10 years or more and the ex-spouse is older than 62 and unmarried, the lower-earning spouse may be entitled to collect a “spousal benefit” worth up to 50% of his or her ex’s benefits.

Therefore, if an ex-spouse retired, waited until age 66 to start receiving benefits and is receiving the maximum amount of $2,687… the “spousal benefit” would be $1,343.50!

This doesn’t reduce the higher-earning spouse’s benefits. Any benefits paid to a past spouse have no effect whatsoever on your benefits.

The lower-earning person can claim the Social Security payment even if their former spouse is eligible but not yet receiving benefits.

Use the “Viagra Benefit” to Provide Benefits for Your Children

If you have children later in life, there’s a little-known advantage dubbed the “Viagra benefit” that could shift your thoughts about when to retire.

When you reach your full retirement age, your children – whether biological, adopted or step – may also qualify for benefits on your record.

In a typical older husband/younger wife household, each child can get monthly checks. Here’s how the benefits work…

When you qualify, an unmarried child 18 or younger can collect up to half of your retirement benefits. A full-time high school student also makes the grade until the child graduates or turns 19, whichever comes first.

In a typical older husband/younger wife household, each child can get monthly checks. Though the limit per family (assuming the mother hasn’t reached her retirement age) is typically 50% of the husband’s full retirement benefit.

So let’s say a father files when he reaches 66 and is entitled to $1,500 a month. Although he’s filed, he opts to delay taking his retirement benefit until he turns 70. But his two children can, together, collect half of what he would be getting ($750) until they’re at least 18. And if his younger wife is the caregiver, she can also collect until the children turn 16… even if she’s only 40. In that case, the $750 monthly check would be divided amongst three people instead of two. Importantly, benefits paid to your children will not decrease your retirement benefit.

Be Wary of These Social Security Restrictions and Common Mistakes

The government has put limits in place to lower Social Security benefits. One restriction is earning too much income when you start taking your payments.

When you’re under the full retirement age and collecting Social Security, you’re allowed to earn only $17,640 per year from your job (i.e., earned income). For every $2 you earn over the limit, your check generally goes down by $1.

Some people who are still working even have to pay federal income taxes on their benefits. But no one pays taxes on more than 85% of it.

You must pay taxes on your benefits if you file a federal tax return as an “individual” and your combined income (adjusted gross income + nontaxable interest + ½ of your Social Security benefits) exceeds $25,000. If you file a joint return, you must pay taxes if you and your spouse have a combined income of more than $32,000. And if you’re married and file a separate return, you probably will have to pay taxes, too.

Taxes and restrictions can lower your Social Security income. So can mistakes.

The SSA isn’t perfect. It makes errors. So it’s a good idea to double-check their calculations. Make sure the numbers they use represent what you actually made and contributed to Social Security throughout the years.

Here are five common errors to watch out for…

  1. Trusting your financial advisor to plan for your Social Security

  2. Thinking the government will advise you on how to maximize it

  3. Not reviewing your earnings history

  4. Applying for benefits just because you’re eligible

  5. Forgetting to take two lifetimes into account (you and your spouse).

To maximize your benefits, prepare and review the numbers to avoid mistakes.

Folks should always check and make sure their numbers are accurate. There can be discrepancies, especially for the self-employed. Even errors with a small impact on your monthly benefits – say $5 or so – can add up and compound over time.

Each retirement situation is a little different. But if you’re in decent health, it’s best to wait to file your payments. Average life expectancy has climbed to about 80 years in the U.S. today.

The $79,687 Social Security Loophole

Nearly 90% of individuals over the age of 65 rely on Social Security income to pay for a large portion of living expenses during their retirement years. Figuring out the best way to maximize your benefits is critical if you want to enjoy this period of your life.

If you’re not fully aware of how and when those benefits are taxed, you should be… because that can make a huge difference.

If combined income for a single individual is above $25,000 but below $34,000 – or above $32,000 but below $44,000 for married couples – 50% of your benefits are taxed. Combined income above these maximum amounts results in benefits that are taxed up to 85%.

Keeping Uncle Sam’s fingers off your Social Security income can make the difference between traveling around Europe and struggling to pay your bills.

In fact, over the life of your payments, you can get an extra $79,687 in benefits if you simply manage how, when and from where you get income.

Most couples don’t want the type of lifestyle that comes with an income of just $32,000. They need, or want, to be able to travel, dine out and generally enjoy a comfortable existence. Fortunately, that is possible…

If you’re receiving Social Security benefits, you can get creative to avoid reaching or exceeding the relatively low combined income limits.

Instead of taking distributions from a traditional IRA or other pre-tax retirement savings plans – such as an employer-sponsored 401(k) or 403(b) – take distributions from a Roth IRA. After all, Roth IRA distributions are made with post-tax dollars, so withdrawals are tax-free in retirement.

And if you’re approaching retirement, think about doing a Roth conversion. Just be aware that you pay income tax on the switch, so balance this against other deductions you could take.

Get an Additional $750 Back From Social Security

Did you work for two or more employers last year? If so, make sure you don’t miss out on an easily overlooked tax credit.

Check to see the total amount of the Social Security taxes each of your employers withheld from your pay. The tax is also known as FICA, which stands for Federal Insurance Contributions Act. The maximum amount withheld should have been $8,240, according to the IRS’ Publication 17.

If the amount withheld by your employers totals more than that, you can claim a tax credit for the excess.

Here’s an example: Let’s assume you are fortunate enough to hold two high-paying jobs. Suppose you earned $70,000 from one employer last year. That employer withheld $4,340 in Social Security tax, or 6.2% of your wages. But you also worked for another employer and earned $75,000 in wages. That second employer withheld $4,650 in Social Security tax, bringing the yearly total up to $8,990.

Subtracting $8,240 from that $8,990 gives a difference of $750. And that’s your tax credit.

It’s up to You – and You Alone – to Get Every Cent You’re Owed

I hope we’ve convinced you that Social Security isn’t as simple as collecting $1,641 monthly from the government. There are many rules in place that most Americans overlook. But taking the time to learn the ins and outs gives you an edge. With a little planning, you can live a much wealthier life during retirement.

Add it all up and, with a few hours of “work,” you could soon claim an extra $10,224 to more than $130,000!

It’s not hard to see why so many claims are filed wrong when the instructions are written in such a confusing manner and getting proper answers from the SSA staff is a crapshoot.

And as I mentioned earlier, don’t wait for someone there to contact you. They won’t point out errors, notify you about potential loopholes or provide advice on how to maximize your benefits. The SSA is deeply in debt, provides awful customer service and – according to a PBS News Hour story – knowingly provides “misinformation.”

It’s up to you to take the initiative. So I hope you’ll use many, if not all, of the steps and strategies I’ve outlined above and maximize your Social Security benefits.

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