Maximize Social Security Benefits with Three Clever Tricks
Obviously, retirement brings on a host of new challenges for seniors-specifically in the financial arena. However, armed with the proper tools, seniors can ensure a financially comfortable retirement. The objective is to build a strong foundation of retirement funds that provide a steady stream of income you won’t outlive.
In the past, most seniors and their financial planners have somewhat dismissed Social Security as a powerful retirement planning tool. Although Social Security certainly offers a reliable stream of income, the amount is diminutive and the benefits have a limited range of motion.
However, between the ages of 62 and 70, there are three clever tricks seniors can use to maximize their Social Security benefits: a reset, a file and suspend and restricting an application. By employing these three strategies, seniors may be able to greatly boost their benefits. Here’s how each tactic works:
Trick #1: Do over
The Social Security reset, or do over, is a great tactic for those who regret taking a reduced benefit at the age of 62. If you wish you would have waited and received the full benefit at 65 or 66 or earned the extra delayed retirement amount by putting off retirement until the age of 70, you’re in luck: you may have a second chance.
You can “reset” your benefit amount by coming out of retirement. All you have to do is file Social Security Form 521, also called “Request for Withdrawal of Application.” You’ll have to repay all the Social Security benefits you’ve received to date (no interest or inflation adjustment included.) Then, you can reapply for Social Security at your current age. You can only pull the reset one time-once you file Form 521, it’s irreversible.
The Social Security Administration will almost automatically approve your request, and you will receive the higher Social Security benefit amount for the rest of your life. Plus, your spouse may be able to collect additional spousal or survivor benefits based on your amped up benefit as opposed to your lower “early” retirement amount.
Trick #2: File and suspend
If you are married and you and your spouse retire at different ages, you can use the “file and suspend” tactic to maximize your Social Security benefit.
For example, let’s say you have reached your full retirement age at 66, but you plan to work until 70 to receive the delayed retirement credits. (This bonus can increase your full benefit amount by 32%.) Your wife, who does not work, just turned 62. You can file for Social Security now, but request an immediate suspension of your benefits. Then your wife can apply for her Social Security benefits at your current benefit level. Your wife will receive checks at a higher amount than she would have on her own employment record, and you won’t be locked into the lower benefit payment.
Once you turn 70, you can remove the suspension and begin receiving checks at the higher delayed retirement amount. Additionally, if you save up enough money to pay back the benefits your wife received, you can reset at the age of 70. This will not only increase your benefit, but it will also boost your wife’s spousal and survivor benefits.
Trick #3: Restricting an application
The restricted application is another tactic that may increase your benefits. Let’s say Bob is 66 and plans to work until he’s 70. His wife Jenny, who is also 66, is ready to retire. Jenny won’t be collecting from Bob’s record because she has earned her full benefit on her own record.
Instead of filing for Social Security, Bob decides to “restrict an application” only to Jenny’s benefits. This allows Bob to file as a spouse on Jenny’s record and collect half of her full benefit. In the meantime, Bob can continue working and build up delayed retirement credits on his own record. If Jenny earns $800 a month, Bob will collect $400 a month-which boosts their overall benefit amount by 50%.
Then, when Bob retires at 70, he will earn a higher benefit amount for his delayed retirement credits. Once again, this will mean Jenny will collect a higher benefit if Bob dies before her.
While these three Social Security tricks can help many taxpayers amplify their benefits, these strategies aren’t for everyone. For example, let’s say you plan to collect early and reset later. What if you are unable to save enough to pay back the benefits? Even worse, what if you die before having a chance to reset? Your spouse will then be left with a meager survivor benefit.
You should take time to think things through before you employ any of these tactics. You may want to discuss your options with a financial professional, who can help you come up with the best game plan for your unique situation.