5 Social Security Tips for 2018 -- and Beyond
If you don't know a lot about Social Security, you'd do well to start learning, because odds are, the program will be critical to your financial security in retirement. After all, a full third of the income of elderly Americans is made up of Social Security benefits.
If you don't make certain savvy moves, you could leave many thousands of dollars on the table, so here are five valuable tips to help you be smart about Social Security and get as much in benefits as you can.
Tip No. 1: Know your full retirement age
For starters, know your "full retirement age." No matter when you think you should retire or when you end up retiring, you have a full retirement age, which is the age at which you can start collecting your full Social Security benefits. Your full retirement age is somewhere between 65 and 67, depending on when you were born:
Full Retirement Age
1943 to 1954
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 or later
Data source: Social Security Administration.
Knowing your full retirement will help you make good Social Security decisions, as you'll soon see.
Tip No. 2: Know how much money you can expect
Next, it's good to have at least a rough idea of how much income you can expect to collect from Social Security, as it can help in your retirement planning. For context, know that the average monthly retirement benefit check was recently $1,420 -- or about $17,000 per year. But that's just an average. If you've long been an above-average earner, you'll collect more than that -- and vice versa. For 2018, the maximum benefit for those retiring at their full retirement age is $2,788 and the maximum for those who wait until age 70 is $3,698. For 2019, those numbers rise to $2,861 and $3,777, respectively.
Averages are limited in their helpfulness, though. So set up a my Social Security account with the Social Security Administration (SSA) in order to get a good estimate of how much income you can expect to receive from Social Security. Once you do, you'll be able to see the SSA's record of your earnings for your entire working life, as well as estimates of your future benefits. The account will also let you correct any errors and request a replacement Social Security card (if you meet certain criteria), among other things.
Setting up an account can also prevent identity theft and headaches, if you set up your account before a scammer does so for you, pretending to be you.
Tip No. 3: Keep an eye on your Social Security earnings record
The SSA used to send out annual summaries of earnings and estimated benefits to workers through the mail, but relatively few people get those summaries anymore. That's where your my Social Security account comes in. It may be more of a hassle to set it up than to simply open an envelope once a year, but it will let you check your record at any time, as often as you'd like.
It's smart to do that, too -- once a year or so, review the SSA's record of your earnings to make sure you don't see errors. If it doesn't reflect all your earnings, you'll end up collecting smaller benefit checks than you should. The SSA itself has said that "in some situations, if an employer did not properly report just one year of your work earnings to us, your future benefit payments from Social Security could be close to $100 per month less than they should be," adding, "Over the course of a lifetime, that could cost you tens of thousands of dollars in retirement or other benefits to which you are entitled."
It's smart to not put off checking the record, because as years go by, you may no longer have your own record of your earnings, in tax returns or W-2 statements, or elsewhere.
Tip No. 4: Think about when to start collecting Social Security benefits
One of the most important decisions to make regarding Social Security is choosing when to start receiving your benefits. Your full retirement age isn't when you have to start collecting your benefits. You can actually start as early as age 62 and as late as age 70. There's a catch, though: For every year beyond your full retirement age that you delay starting to receive benefits, you'll increase their value by about 8% -- until age 70. So delaying from age 67 to 70 can leave you with checks about 24% fatter. And if you start collecting early, your benefits can be up to about 30% smaller. The table below shows how much of your full benefits you'll receive if you start collecting at various ages:
Start Collecting at:
Full Retirement Age of 66
Full Retirement Age of 67
Data source: Social Security Administration.
You might think that delaying until age 70 is the best move, but that's not necessarily the case. The system is designed so that, for those with average life spans, total benefits received are about the same no matter when you start collecting. After all, while checks that start arriving at age 62 will be considerably smaller, you'll receive many more of them. Thus, it's not necessarily dumb to start collecting early , and the age at which most retirees start collecting was recently 62. If you can wait, though, and you stand a good chance of living a longer-than-average life, then go ahead and shoot for starting to collect at 70 or close to it.
Tip No. 5: Increase your Social Security benefits
Finally, know that you do have a bit of control over the size of your benefit checks. There are actually a handful of ways to increase your Social Security benefits . Start by knowing how the Social Security Administration computes your benefits. Its formula is based on your earnings in the 35 years in which you earned the most, so if you only earned income in 30 years, it will be incorporating five zeros, which could shrink your benefits considerably. Many people will want to have 35 years of earnings, if possible. Even if you have worked 35 years, if you're now earning much more than you have in the past (on an inflation-adjusted basis), you might consider working for another year or two, as each high-earning year will kick a low-earning year out of the calculation.
If you're married, there are more strategies to consider. For example, you and your spouse might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, you'll both enjoy some income earlier, and when the higher earner hits 70, they can start collecting extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks as their own.
These are some of the most important things you need to know about Social Security. Keeping them in mind and acting on them can help you get even more from this important program, and it can make the difference between a stressful and comfortable retirement.
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