In 2014, social security benefits made up 39% of the income of the elderly (on average), totaling nearly $863 billion. As more and more baby boomers approach retirement age, that total will increase dramatically, but unlike past generations, baby boomers are one of the first generations with the ability to seek out information online, equalizing information that only those with financial knowledge had previously been privy.
A little bit of knowledge can go a long way. To optimize your social security payout, consider employing some of the tips below which could potentially net you tens of thousands of dollars over your retirement lifetime.
· Year of birth matters. If you were born between 1943 and 1954, you can collect your ‘primary insurance amount’ at 66. The age rises to 67 for those born between 1955 and 1960.
· The longer you wait to collect, the bigger your monthly benefit will be. Technically, you can start claiming at 62, but your benefit will be reduced for each month.
· If you plan on delaying collecting benefits, it’s best to have a Roth IRA, taxable accounts and health savings accounts from which to draw living expenses.
· Prepare to live longer than expected. It’s the most efficient longevity protection possible.
· Consider paying for advice. Social security is complicated, and it can pay to have someone else do the math, particularly when figuring in other assets and taxes.
Best strategy for singles
· If you can delay benefits until you reach 70, you can maximize your checks for the rest of your life because you receive a delayed retirement credit of 8% each year you wait to claim full retirement until that age.
· Divorced? If you were married for at least 10 years, you can double down. Each spouse is allowed to claim the other’s benefits before switching to a bigger benefit.
Best strategy for married couples
· Married couples can ‘tag-team’ by one spouse claiming spousal benefits to delay their benefit until their benefit reaches the maximum, and then switching. The optimal strategy should take into account life expectancy for you and your spouse; by taking into account family history and medical conditions, you might be able to bet on a shorter life (terrible as that sounds), but it’s safer to plan to live longer.
Increasing lifespans are helping retirees enjoy life for decades past retirement, and decisions made in the present can affect your quality of life in your 70s, 80s, and later. Consider some of these tips to ensure fiscal accountability well into the twilight years.