2018 road map to maximizing your Social Security benefits

Most retirees receive more than half their income from Social Security.

With the decline in company pension plans and the low personal savings rate seen nationwide, making wise Social Security decisions is more important now than ever before.

Two of the most important decisions are when to file for benefits and how to coordinate filing with your spouse.

Social Security benefits can be claimed between 62 and 70. However, the timing will affect the amount you receive.

There are other considerations, as well, when finding the Social Security blueprint that is best for you.


Social Security benefits are calculated based on your top 35 years’ worth of earnings. If you worked less than 35, it is still calculated based on 35 years, with zero earnings averaged in for the years you did not work.

Your 35 years’ worth of wages are adjusted, or indexed, to match today’s wages. Based on your adjusted wages, an average indexed monthly earnings is calculated.

A Social Security benefit formula is applied to your average indexed monthly earnings to find your primary insurance amount – the benefit payable to you at full retirement age.

You can receive more or less than your primary insurance amount depending on when you choose to begin receiving benefits.

You become eligible for cost-of-living increases the year you turn 62, whether or not you start receiving benefits.


You can receive benefits based on your spouse’s record, even if you are ineligible for your own benefits.

The benefit amount is 50 percent of your spouse’s benefit. To receive these benefits, you must be at least 62, and your spouse must have filed for benefits.

Some divorced people also are eligible to receive spousal benefits based on their ex-spouse’s work history.

To qualify, the marriage must have lasted at least 10 years, the spouses must have been divorced at least two years, the dependent spouse cannot have remarried, he or she must be at least 62, and cannot qualify for a higher benefit based on his or her own earnings.


You can begin receiving Social Security retirement benefits as early as 62.

However, doing so before full retirement age will mean a reduced benefit.

Your basic benefit is reduced a fraction for each month you begin receiving benefits prior to full retirement age, up to 30 percent.


Full retirement age changes based on the year you were born. Full retirement age is 66 for those born between 1943-1954.

Starting for those born in 1955, two months a year are added until full retirement age becomes 67 for those born in 1960 or later.

If you wait until you reach full retirement age to collect, you will receive your full benefit.


If you continue working past your full retirement age or don’t need Social Security to cover living expenses, you can delay receiving benefits.

For each year you delay, your benefit will increase 8 percent for a maximum possible increase of 32 percent.

On average, Social Security benefits make up about 40 percent of a typical retiree’s income. This makes deciding when to claim them a critical decision.


Your Social Security statement, available at www.ssa.gov, includes estimates for your monthly benefit if taken at 62, full retirement age or the maximum benefit at 70. It also contains estimates of disability, family and survivor benefits, as well as Medicare information.

The statement will include your earnings history. It is critical to review this for errors because your benefit amount is based on it. This information is particularly important if you have spent some time out of the workforce.

Since benefits are calculated based on the top 35 years’ earnings, it may be worthwhile to work a few more years if you’re just shy of 35 years’ worth of wages.


Social Security benefits are calculated so the amount you receive over your lifetime should be about the same whether you claim it at 62 or 70. You either receive the money as a smaller monthly payment over a longer period of time or a larger monthly payment over a shorter period of time.

The best time to claim benefits hinges on how you compare to the averages.

A man turning 65 is expected to live until age 84.3, and a woman turning 65 until age 86.6.

If, based on your health and family history of longevity, you believe you will live much longer than that, your overall lifetime benefit will be greater if you delay claiming your benefits.

If the opposite is true, and you see little chance of making it into your mid-80s, you would receive a greater lifetime benefit by taking it sooner.


Aside from life expectancy, rates of return should be considered. Social Security growth is calculated at the Treasury-bond rate.

If you are able to invest your benefit instead of spending it, you may be better off claiming early and investing it in an effort to earn better rates of return.

Then, though you start with a smaller monthly payment, the growth from investments may leave you with more money than if you had waited to receive the increased benefit.


Because married people can receive their own benefit or a spousal benefit, they have more to consider. By coordinating properly, married couples can maximize benefits.

The Society of Actuaries recommends the lower-earning spouse begin collecting benefits early, while the higher-earning spouse waits as long as possible. That way, you can use the lesser benefit while maximizing the greater benefit.

Many times, it is the husband with the greater benefit. Women also tend to live longer than men.

With this strategy, you maximize the husband’s retirement benefit for use while he is alive, and it also maximizes the wife’s survivor benefit when he dies.


Any income you earn before the year in which you reach full retirement age reduces your Social Security benefit once it surpasses a specific limit.

For 2018, the limit is $17,040. Once your earnings exceed that, your Social Security benefit will be reduced by $1 for every $2 you earn.

For example, if you earn $20,040 in 2018, you have earned $3,000 more than the limit. Because of that, you will receive $1,500 less from Social Security.


Income restrictions change the year you reach full retirement age.

That year, there is a higher limit, which is $45,360 for 2018. Your Social Security benefit will be reduced by $1 for every $3 you earn once you pass that limit.

As soon as you have your birthday and reach full retirement age, though, there are no more limits.

At that age, you can earn as much as you want with no effect on Social Security retirement benefits.


Continuing to work into retirement may be beneficial even if current benefits are reduced.

If your income is within the top 35 years of your earnings, you will increase your average indexed monthly earnings, the average used to calculate your benefit.

By continuing to pay into Social Security as a worker, you can increase your retirement benefit even after starting to collect it.

Lisa Strohm is founder and CEO of The Athena Network, a financial and life management firm in Upper Saucon Township, providing investment advice and financial planning offered through Good Life Advisors LLC, a registered investment adviser. (The Athena Network and Good Life Advisors are separate entities.) She provides fee-based financial planning and investment management for women, their spouses and extended families. She can be reached at 484-224-3439 or lisa.strohm@the-athena-network.com.

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