5 Simple Ways to Increase Your Social Security Benefits!

 Welcome to "The Retirement Guide" Podcast! I'm your host George Jameson, owner of Capital Wealth Group, a Fee Only Advisory firm. Whether you’re nearing retirement or already retired, Join me each week as we explore the world of retirement planning and equip you with the knowledge and tools you need for a successful retirement.

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Transcript

George Jameson, CFP®: 0:18

Welcome. Today we're going to explore five simple ways to increase our social security benefits. But before we get started, I'm George Jameson, certified financial planner and founder of Capital Wealth Group, located in Columbia, South Carolina. Social security is one of the cornerstones of retirement planning, yet many of us aren't completely sure how it works or how we can maximize the benefits. Today I'll walk you through how Social Security is funded. The unique ways it calculates your benefits. And most importantly, share five actionable strategies that may help boost your monthly check in retirement. So first, let's talk about how Social security is funded. It is funded by payroll taxes, 6.2% from you, and 6.2% from your employer applied only to income up to a yearly cap of 176,100 for 2025. This combined, 12.4% tax is what builds your future benefits. Next, how is your Social Security benefits calculated? The formula is a little complex,, but here is what really matters. First, your past income years are indexed to reflect today's dollars. And second Social Security Administration averages your highest. 35 years of earnings. If you have less than 35 years, zeros fill in the gaps lowering your benefits. And then third, those earnings are divided by 420, which are the number of months in 35 years to get your average indexed monthly earnings, also called aim A IME. And fourth, the Social Security Administration takes your average index monthly earnings and runs it through a formula using what's called bend points that favor lower income earners to determine your primary insurance amount called P-I-A-. PIA is actually just your estimated monthly benefits at your full retirement age, which is age 67, if you're born in 1960 or later. So what's most important for you? Keep an eye on your earnings record. Log into your My social security account. At ssa.gov to check that your earnings for each year are accurate. You can also see your personalized estimated benefits. Now we'll discuss understanding retirement ages and benefit adjustments at your full retirement age, which is age 67. For most of us, you'll get a hundred percent of your primary insurance amount. However, as most of you know, you can start collecting as early as age 62 or delay benefits all the way up to age 70. Okay, and here's why this matters. Starting your benefits before your full retirement age means a permanent reduction in your monthly payments. For instance, at age 62, you receive about 70% of what you would get at your full retirement age. That's a big reduction. At age 63, it's roughly 75%. By age 64, you get around 80%, and at age 65, the benefit increases to about 86%. And at age 66 it's about 93. And then finally, again, at your full retirement age, 67, you receive a hundred percent of your calculated benefits. Of course, you can also delay benefits up to age 70. Which will boost your social security benefits by 8% per year. So at age 70, you would get about 124%. This can be a powerful incentive if you're in good health and expect to live a long act of retirement, but it's definitely not the right choice for everyone. Please keep in mind that social security is a very individualized decision. And when to start will depend on many factors. You should not decide on when to take Social Security in isolation. The decision should be part of a well thought out retirement plan. Now that we have a handle on how social security works. Let's dive in to the five simple ways you can potentially increase your benefits. So number one, work a full 35 years. It may sound obvious, but one of the best ways to boost your benefit is to work a full 35 years, even if it's part-time. Social security calculates your benefits based on your highest 35 years, like we said, and if you have years with no income, those years will drag down your average because it will show zeros in front of those years. So even part-time work is better than nothing. And filling those gaps can make a big difference and number two, wait longer to collect benefits. it might seem smart to start your benefits at 62. A lot of people do and sometimes it is smart. But you'll only get, again, 70% of your full benefit. If you're tired of your high stress job and you're at the age 62, consider a less stressful job, or even a part-time gig and wait until at least age 65, where you'll get almost 87% of your full benefit versus 70% at 62. Of course, if you're healthy, continue that part-time gig and wait until at least 67, which can really pay off. And then number three, understand spousal and survivor benefits. If you're married or even divorced after a long marriage, 10 years or longer to be exact, you might get extra benefits. What do I mean? You can choose to receive your own benefits or up to 50% of your spouse's or even ex-spouse's benefits, whichever is higher. Plus, if your spouse or ex-spouse dies before you. The surviving partner can get 100% of their benefit at full retirement age. This can really help protect your financial future. And then number four, coordinate social security with your overall retirement strategy. This is a big one. Your social security decision shouldn't be made in isolation. It's very important to consider how your social security benefits interact with other sources of income, such as withdrawals from your retirement portfolio. Possibly pensions and even tax considerations If you're married and one spouse makes a lot more than the other, the one who makes the most may want to delay social security benefits. So if he or she were to pass first, the spouse who made less would be able to get a hundred percent of their other spouse's social security. And then number five, if you start your social security at age 62, planning to only make up to the maximum allowed, but end up making more or have the opportunity to do so. Please don't worry you have options. Just to clarify, in 2025 before you reach your full retirement age, for every$2 you earn over 23,400, your benefit drops by$1. Then in your full retirement age year, every$3 over 62,160 cuts your benefits by$1. But once you hit full retirement age, you can make as much money as you want without affecting your social security benefits. So now that you got the figures, let's say you retired from your stressful tech job at 62 and started Social Security because you wanted your investments to grow and you decided to become a realtor and sell homes part-time for several years. You thought that you could sell a couple homes to make the 23,400 and then collect your social security at age 62, but you ended up loving it and doing very well and making six figures.,so here's three ways to handle this situation. So first, keep getting the benefits. You'll likely still get some money now, and the money that was held back because you went over the limit will be recalculated at your full retirement age. And then second, you could actually withdraw your claim if it's been less than 12 months. And you're just killing it in real estate. You can pay back the benefits you got and it will be like you've never started your benefits at all. You then start social security later on at full retirement age or whatever age you decide with a higher monthly benefit. But keep in mind, you can only do this once And third. You can suspend benefits at your full retirement age. If you're now 67 and still enjoy selling real estate, still making six figures and still in great health, you can pause your benefits to earn extra credit each month, which will boost your monthly check later on. So what's the bottom line? If you started Social security at 62, which a lot of people do, and you're still working, don't stress about how much you can make. If you earn more than you expected to, social Security will credit you for it when you hit your full retirement age. So keep doing what you love and enjoy your success. So before we wrap it up today, let's quickly recap the key takeaways. Number one, contributing 35 years to your earnings record ensures you get the most out of your social security calculation. And then number two. You may want to wait to collect. If you're in good health and can't afford to wait, delaying benefits can make a big difference. Then number three, leverage spousal and survivor benefits. Understand that you can receive benefits based on your spouse's or ex-spouse's earnings record at 50% or a hundred percent after your spouse or ex-spouse has passed. And then four, integrate social security with your overall retirement strategy. I can't stress this enough. Always consider your social security in the context of your broader financial picture, including investments, tax planning, and your overall retirement income strategy. And then five. Don't stress if you earn more than expected and already have started Social Security Day 62. Social Security will credit you for when you hit full retirement age. You'll also have a one-time option to repay the benefits within the first 12 months and withdraw your application as if you never started. Remember, social security is a critical piece of your retirement puzzle, but it doesn't stand alone. Make sure you consider it alongside your portfolio withdrawals, tax strategies, and other retirement income sources. Please consult with a trusted financial planner that uses financial planning software when it comes to deciding on when it's best for you to start Social Security, a retirement planner and financial planning software can make a world of difference in creating a strategy that's best for you. I hope you enjoyed today's discussion on social security. If you did, please subscribe and hit the thumbs up button. I'd love to hear your thoughts. Drop a comment below and let me know what you think. If you're looking for a financial advisor, I'd be honored to work with you. Please click the link in the description to schedule a free no obligation call. Also visit our website for more information about my firm, our fees, and how we can help you reach your financial goals. Thank you and have a great day.