How to Increase Social Security Benefits After Retirement

Video Transcript

Our journey through life is almost never a straight line. It's full of twists and turns and probably a few unexpected detours along the way. As you're getting ready for retirement, some of those detours you've experienced may significantly impact how you'll need to plan for the future, including what you'll be eligible to receive from Social Security, and which claiming strategy may work best for your needs.

There are many detours in life we may need to navigate, but two that tend to have the biggest impact on Social Security benefits are issues cited marriages and divorces and receiving Social Security benefits while still earning employment income. Let's start there first. How does working while receiving Social Security impact your benefits? First, it's important to remember that for most baby boomers, full retirement age is not 65 as some may think.

Instead, it likely falls somewhere between age 66 and 67, depending on your birthday. And though you can choose to collect as early as age 62, your benefits will be reduced for doing so.

Marriage, remarriage, and divorce can also have a big impact on your Social Security benefits. And the guidelines here could be a bit confusing without the guidance of a financial or tax professional. If you've been divorced, you may be entitled to a portion of your former spouse's benefit and at the same time, your former spouse may be entitled to a portion of your benefit.

Among other variables, eligibility is based upon how long you're married and whether remarriage has occurred. This is very important to keep in mind, especially if you're considering getting remarried during retirement. It could impact the benefits you're eligible to receive. If you're a widow or widower you may be also eligible for benefits through survivorship benefits. Similarly, the length of marriage and any remarriages that have occurred can impact your eligibility.

There are other detours in life that we haven't talked about today that can require a bit of extra navigation when it comes time to retire. Thankfully, you don't have to figure it out alone. Taking a few moments to talk with a financial professional can help you better understand how Social Security works and can help you make sure you're choosing a claiming strategy that will work best for your needs.

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Key Takeaways

• Delaying retirement benefits past full retirement age can increase payments by up to 8% per year.
• Working longer and replacing lower earning years may boost your benefit calculation.
• Consider health, spousal benefits, assets available, and COLA when deciding when to claim.
• Claiming early permanently reduces benefits; waiting until 70 results in maximum benefits.
• Review your unique situation to determine if claiming now or waiting is better for you.

Once you stop working, your income likely comes from savings, investments and retirement benefits. As a result, it can help to understand how to potentially increase Social Security benefits after retirement. The choices you make could affect your retirement income for the rest of your life.

Key Social Security Ages

Your Social Security retirement benefit depends on several factors. These include your earnings during your working years and the timing of your claim. Here are the common scenarios and retirement age milestones:

Claiming Early

Most people can claim retirement income benefits as early as age 62, but the Social Security Administration reduces your payment if you claim before your full retirement age.¹ (Your full retirement age will depend on the year you were born.²)

• If you claim early, your benefits will be reduced based on how long you receive benefits before your full retirement age. For instance, receiving benefits at age 62 may cause your benefit to be reduced by 25 to 30 percent, depending on when you were born.
• If you continue to work after claiming benefits early, you may receive less than your full benefit if you earn too much (until you reach full retirement age).

Claiming at Your Full Retirement Age

This ensures that you receive your full retirement benefit. You can also earn income without reducing your retirement benefit.

Waiting to Claim

Postponing your benefits could result in a higher benefit amount. If you're wondering how to increase Social Security benefits after reaching full retirement age, this is one possible way. Those with a full retirement age of 66 could increase benefits by 8 percent for each full year they delay retirement benefits, but the increase ends once you reach age 70. You could potentially receive 132 percent of your full retirement benefit by waiting until age 70 to receive benefits.³

What Happens if You Keep Working?

If you claim Social Security early and keep working, you may reduce your benefits if you earn too much. But it could make sense to continue to earn income — especially after you reach full retirement age.⁴

Working can help increase Social Security benefits if you add high-earning years to your Social Security record. You might be able to replace some of your lowest earning years and get a higher benefit calculation. (Social Security calculates benefits from your highest 35 years of income, and you may be able to bump lower numbers off the list.⁵)

If you earn income, you may not need to withdraw as much from your retirement savings. As a result, you could preserve these assets and draw on them later, potentially extending the life of your portfolio.

Factors to Consider

• Longevity: The decision of when to start receiving your Social Security benefits depends, in part, on your health. With a long life expectancy, it may make sense to delay claiming. But with a shorter timeline, claiming early could be better.
• Spousal benefit: If you have a spouse who might take Social Security based on your retirement benefit, consider making choices with them in mind. Claiming early could permanently limit the amount available to them if they file on your record.
• Assets available: If you're unable to work, you may need to rely on your savings. If you have significant assets in savings, you might have options. But with limited assets, waiting to take Social Security could make a dent in what you've saved.
• Cost-of-living adjustments: Social Security payments can change with inflation. If that happens, your payments typically increase by a percentage specified by the Social Security Administration. If you have a larger retirement benefit (because you delayed claiming, for example), the increase will be a larger dollar amount, and those increases may potentially continue in future years.

Should You Claim Now or Wait?

The decision of when to take Social Security benefits is a personal one, and it depends on numerous factors. Nobody is exactly like you, so you'll likely need to review your circumstances, along with the pros and cons of each choice. With the right Social Security choices, you (and your family members) may be able to preserve your assets and live comfortably in retirement.

Sources

1. You Can Receive Benefits Before Your Full Retirement Age. https://www.ssa.gov/benefits/retirement/planner/applying2.html.
2. Starting Your Retirement Benefits Early. https://www.ssa.gov/benefits/retirement/planner/agereduction.html.
3. If you were born between 1943 and 1954 your full retirement age is 66. https://www.ssa.gov/benefits/retirement/planner/1943-delay.html.
4. Receiving Benefits While Working. https://www.ssa.gov/benefits/retirement/planner/whileworking.html.
5. Your Retirement Benefit: How It’s Figured. https://www.ssa.gov/pubs/EN-05-10070.pdf.