Social Security might seem like fixed income, but it’s not. There’s actually plenty you can do to increase this retirement benefit.
So where do you start?
Social Security bases your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits. If you have less than 35 years of earnings, Social Security uses a zero for each year without earnings when calculating the amount of retirement benefits you are due. In other words, years with no earnings reduce your retirement benefit amount.
So here are some suggestions for helping cushion your nest egg by getting the most out of the program.
1. Put in more time
Consider working long enough to replace some, or all, of those years with no earnings. Those more recent earnings will increase your benefit amount.
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2. Work and collect Social Security
If you’re working and collecting Social Security while younger than full retirement age you’ll face something called the earnings test, says Mike Piper, author of “Social Security Made Simple.”
“The earnings test results in your benefit being withheld and eventually recalculated – that is, adjusted upward – upon reaching full retirement age, says Piper.
So, for example, if a person files 40 months prior to full retirement age, and the earnings test results in their benefit being fully or partially withheld for 22 months, then once they reach full retirement age, their benefit would be adjusted to what it would be if they had only filed 18 months early, rather than 40, says Piper.
3. Withdraw or suspend your Social Security application
If you’ve filed for Social Security but wish you had waited, there’s a way for you to increase your benefit provided to you within 12 months of beginning benefits. You can withdraw your application, says Piper.
This would be done via Social Security Form SSA-521, and it requires paying back all benefits received to date.
You can also suspend retirement benefits after reaching full retirement age, says Piper.
“Note that with the rules change that went into effect in 2016, if a person suspends their own retirement benefit, it will also suspend the benefit of anybody else on that work record,” he says. “So for example, if you suspend your retirement benefit, it would also suspend your spouse’s benefit .”
4. Delay claiming it
It should be well known to many, but it bears repeating: Claiming Social Security before full retirement age reduces your benefit. However, claiming Social Security after full retirement age, up to age 70, increases your benefit by 8% a year.
So, if you were born in 1957, your benefit would be 128% of your primary insurance amount, the amount you would get by claiming at full retirement age, by waiting to claim until age 70.
One other possible benefit if you delay claiming after full retirement age: The surviving spouse will receive 100% of the deceased spouse’s primary insurance amount (PIA) plus any delayed retirement credits that the deceased spouse earned up to their death.
5. Use a reverse mortgage to reduce taxable income
You can keep, and spend, more of your Social Security income by being mindful of other income, says Joe Elsasser, president of Covisum.
“Social security benefits are not taxed if they are your only income,” he says. “They become taxable as you add other taxable income.”
A good example, he says, is someone who has a mortgage, distributions from a traditional IRA, which is taxed at ordinary income tax rates, and Social Security benefits. Assuming the facts and circumstances make sense, Elsasser says “a reverse mortgage can reduce the amount that needs to be taken from the IRA, potentially significantly increasing the spendable overall value of the Social Security benefit and the IRA withdrawal.”
According to the Federal Trade Commission, reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. And the money you get usually is tax-free.
Robert Powell, CFP, is the editor of TheStreet’s Retirement Daily and contributes regularly to USA TODAY. Have questions about money? Email Bob at firstname.lastname@example.org.
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.