Did you know that in 2023 approximately 67 million Americans per month will receive a Social Security benefit? To put it another way, nearly nine out of ten people over 65 received Social Security benefits as of December 31, 2022. Moreover, Social Security benefits represent about 30% of an elderly person’s income.
Since your Social Security checks will likely be one of your main sources of income in retirement, knowing how to increase them is vital.
At the same time, Social Security isn’t understood by many people. As a result, they may claim too soon, miss out on important benefits, and fail to take advantage of strategies that could amplify their incomes.
You can avoid these costly mistakes by exploring these ten essential ways to maximize your Social Security benefits in your golden years.
You should always stay informed no matter what stage of your retirement you are in. So, let’s first review the major changes coming to Social Security, and retirement in general, in 2023.
COLA (cost of living adjustment) increases.
In 2023, the Social Security Administration will increase benefit checks by 8.7 percent, a significant increase over the 5.9 percent adjustment for 2022. This is the highest COLA since 1981, when it was 11.2 percent.
Starting in January, retirees on Social Security will receive an increase of $146 monthly in benefits due to the 8.7 percent adjustment. Accordingly, retirees will receive an average check of $1,827 instead of $1,681. Couples receiving benefits will see their estimated payment increase by $238, from $2,734 to $2,972.
CPI-W is the Consumer Price Index for urban wage earners and clerical workers that has been tied to the cost of living adjustments since 1975. To determine the COLA, the SSA compares the third-quarter CPI-W for the prior year with the third-quarter CPI-W for the current year. Following that, the COLA is adjusted based on changes in the CPI-W.
The maximum taxable income is increasing.
Maximum earnings of $147,000 were subject to Social Security taxes in 2022. In other words, workers paying into the system are taxed on wages up to this amount, which is typically 6.2 percent.
There will be an increase in the maximum earnings to $160,200 in 2023, which means that a greater percentage of a worker’s income will be taxable. What’s the reasoning behind this? A higher average wage in the United States contributed to the adjustment.
Social Security benefits will also increase.
A worker retiring at full retirement age will also receive a larger Social Security benefit in 2023, rising from $3,345 to $3,627. For those born after 1960, the full retirement age is 67, so this maximum applies to retirees as well.
It is worth noting, however, that the maximum benefit when retiring before the full retirement age will be different since those benefits will be reduced. It is also true for those who retire after the full retirement age, a strategy that can maximize your benefits.
A rise in benefits is also being seen for spouses and disabled workers.
Widows, widowers, and the disabled will all receive increased benefits in 2023. Those figures look like this:
- A widowed mother with two children can expect to receive a sizable boost, from $3,238 to $3,520.
- Benefits for widows and widowers living alone aged 65 and older will increase from $1,567 to $1,704.
- There will be an increase in the disability benefit for disabled workers with a spouse and at least one child from $2,407 to $2,616.
These are just averages, so your situation and exact benefits might be different.
Social Security adjusts amounts that are exempt from the earnings test.
The Social Security Administration withholds some retirement benefits from your check if you claim your benefits before you reach full retirement age. If you are still working, your retirement earnings test-exempt amounts can claim a significant portion of your benefits. The process in 2023 will look like this.
Before the SSA withholds benefits, you can earn up to $1,770 per month ($21,240 per year) in 2023 before starting to collect Social Security. For every $2 you earn above the limit, you will receive $1 in benefits. During 2022, the maximum exempt earnings were $1,630 a month ($19,560 a year).
FYI, if you reach full retirement age in a given year, this rule still applies, but only until the month you hit full retirement age.
Benefits will be withheld at a rate of $1 for every $3 earned above the limit in 2023 (instead of $2 for every $3 earned above the limit). The ceiling was $4,330 per month ($51,960 per year) in 2022.
Workers who retire at full retirement age will receive more benefits.
Depending on when you were born, Americans who retire this year at full retirement age will see their maximum benefits increase. In 2023, the maximum will increase to $3,627 per month from $3,345 per month.
With that refresher out of the way, here’s how to increase your Social Security benefits.
1. Postpone your application.
Whenever you delay claiming Social Security retirement benefits, your benefits increase by approximately 5% to 7%. You can usually retire between the earliest retirement age of 62 and your full retirement age of 66 and 2 months, which rises to 67 for those born after 1960.
If you can wait beyond the full retirement age, you will get a higher return. You get 8% more benefits by waiting until age 70 to apply. Why 70? This is when your benefit maxes out.
But, there are some serious considerations before you go this route.
In some cases, people claim benefits prematurely because they mistakenly think that they won’t live long. About half of those who predicted they would not live beyond 75 actually did, according to a study by The Brookings Institution. 75% of those who thought they had a 50% chance of living until that age lived to that age.
Even though the monthly benefit increases each month you wait to claim your benefits, it isn’t always best to wait. In theory, claiming benefits early or late won’t matter if you live to an average life expectancy. Delaying your claims will result in an increase in benefits, despite the reduction in benefits for claiming early.
Most people aren’t exactly average, however. Those who are in poor health may benefit more over the course of their lives if they claim early. Moreover, if you have difficulty managing your cash flow, a monthly infusion of benefit checks could help you pay off debt or avoid taking on debt, resulting in long-term cost savings.
2. Double-check your lifetime earnings.
It doesn’t matter who you are; everyone makes mistakes, including the Social Security Administration.
As such, maintaining a record of your yearly income could prevent you from making a big mistake when it comes time to claim Social Security. Incorrect earnings records may result in you not receiving the Social Security benefits you deserve.
Incorrect earnings can occur due to a variety of reasons, such as a misreporting by an employer or a failure to process your name change following a wedding or divorce.
For this reason, make sure your earnings statement is accurate annually in order to avoid losing money due to errors. You may need to send your pay stubs or W-2s to the Social Security Administration if you notice errors. SSA will update your record once your claim has been verified.
Since you probably don’t have a paper trail dating back ten, twenty, or more years, you’re much less likely to be able to prove an error that happened the previous year when you still have your records.
The good news? It is no longer necessary to visit your local Social Security office to view your earnings history. Why? With a my Social Security account, you can easily do this online.
For any errors, please call 1-800-772-1213. Also included in my Social Security account are details about Medicare, disability, and survivor benefits. Moreover, once you begin claiming your benefits, there’s no waiting for a check.
3. Work longer.
You must have at least 40 work credits to qualify for Social Security retirement benefits. Depending on your earnings, you can earn up to four credits per year. Earning $1,640 will get you one credit, or $6,560 for four credits in 2023.
The benefits you receive are calculated based on your 35 highest-earning years, as well. For each year in which you don’t have earnings, $0 will be averaged.
For people who have taken time off to raise their families or otherwise taken time off from work, working longer can be particularly beneficial. It is important to remember that if you start Social Security early, continuing to work may temporarily reduce your benefit. Furthermore, a woman’s income may increase later in life more than a man’s, increasing the potential payoff of working.
With that said, if you’re approaching retirement, you should check your earnings statement first to determine if you qualify for Social Security. You may be able to boost your Social Security benefits if you work an additional year or two.
You might qualify for Social Security benefits if you work for an extra year or two after your first job, even if you weren’t covered by Social Security in your first career.
4. Make more money.
In addition to maxing out your earnings, you can increase your Social Security check in the future by working as long as you can. As of 2023, “maxing out” means earning over $160,200, which is the maximum amount of income subject to Social Security payroll taxes of 6.2%. Once you’ve maxed out during all 35 of your highest-earning years, you’ll qualify to receive your full Social Security benefits. By 2023, that will amount to $3,627 per month.
When it comes to applying for Social Security, self-employed people often try to minimize the amount of their income subject to payroll taxes. Increasing taxes in the short term could result in higher, inflation-adjusted income throughout your life.
5. Think twice before retiring early.
Is there anyone who hasn’t dreamed of retiring early?
Despite the temptation to begin collecting your well-earned Social Security benefits at age 62 (the earliest you can do so), you will receive lower benefits as a result. As a result, retiring at a certain age will greatly affect your benefits. A 62-year-old, for example, would receive about 30 percent less benefit in 2022 than a 67-year-old.
With that said, don’t rush into early retirement. Instead, weigh the pros and cons. As an example, if your benefits are reduced, you might have trouble paying for your healthcare. Retirement health care costs for an average retired couple may require approximately $315,000 in savings (after taxes) in 2022, according to the Fidelity Retiree Health Care Cost Estimate.
Remember, you’re not supposed to live off Social Security alone. However, getting 100 percent of your Social Security is the best.
6. Include your minor child.
Depending on your Social Security benefits, your children may also receive checks. The pension or disability benefit of a primary worker may be shared by an unmarried minor child up to 50%. Children typically receive this child benefit until age 18, but if they are still in high school, the benefit can continue until age 19.
But, it is also possible to receive child benefits if one is disabled and the disability began before the child turned 22 years old.
Depending on the earnings record of one worker, a family can collect a maximum amount of benefits. At full retirement age, the maximum monthly benefit is 150% to 188% of the worker’s monthly salary. In the event that your total family benefits exceed the cap, the worker’s check would remain unreduced, but that of your dependents would be proportionately lowered.
Just be aware that if the primary worker starts benefits early but continues working, family benefits, including child and spouse benefits, could be reduced or even eliminated.
7. File for spousal benefits.
The spousal benefit is equal to 50 percent of the retirement benefit of your spouse if you are married. Social Security benefits are available to you even if you don’t have an earnings record on your own — for example, if you were at home caring for a loved one. The eligibility for spousal benefits begins at age 62. The eligibility for spousal benefits begins at age 62.
It is important to note, however, that claiming spousal benefits earlier than your full retirement age will result in a reduction in benefits. It is essential that you and your spouse discuss these benefits in detail, including whether it makes sense for one of you to claim them and when to start receiving them.
Spousal Survivor Benefits
The Social Security Administration pays monthly benefits to about 4 million widows and widowers. It is based on their deceased spouse’s earnings record that they receive these benefits.
Widows and widowers who are full retirement age or older receive 100 percent of the deceased worker’s benefits. Survivors of a spouse are entitled to the following benefits:
- In the case of a disabled spouse who died within seven years of the spouse’s death, benefits may be reduced as early as age 50.
- As early as age 60, benefits are reduced.
Divorced Spouse Benefits
In the event of a divorce, you may be eligible to receive Social Security benefits as a divorced spouse (up to 50 percent of the benefits received by your former spouse). You must meet the following requirements to be eligible:
- Having been divorced from someone who qualifies for or receives retirement or disability benefits from Social Security.
- Before the divorce was finalized, you were married to that person for ten years or more.
- You must be at least 62 years old.
- Currently not married.
- Be ineligible to receive retirement or disability benefits equal to those received by your divorced spouse based on your own work.
A surviving divorced spouse benefit may be payable if your former spouse dies. You will still be eligible for benefits if you remarry after 60.
8. Avoid or minimize taxes.
If you earn substantial outside income, such as wages or dividends, you could be subject to federal income taxes on up to 85% of your Social Security benefits. A combination of your adjusted gross income, any nontaxable interest income, and half of your Social Security benefits determines how much of your benefits are subject to income taxes.
Using tax planning to ensure you don’t overpay the IRS for your Social Security benefits can be beneficial.
If you plan to donate to charity, for instance, you might consider a qualified charitable distribution from your IRA instead of using other funds to satisfy your required minimum distribution. By doing so, the distribution won’t increase your taxable income, making more of your Social Security benefits taxable.
9. Use a do-over.
In the event that you change your mind within a year of applying for Social Security, you will have to pay back all the benefits you have received. Your benefits will be reset so that you can receive the 7% to 8% increase you would have received had you not deferred your application. During your lifetime, you can only withdraw your application once, and after 12 months, it can’t be reinstated.
When you withdraw your application, you are not suspending your benefits. Upon reaching full retirement age, you can suspend your benefit orally or in writing. A withdrawal request must be submitted within one year from the date you filed SSA-521, including any Medicare premiums that were withheld from your paychecks.
10. Suspend your benefits.
Do you already collect Social Security? Have you ever considered suspending and restarting your retirement benefits through the Social Security Administration?
When should you consider this? If you’re concerned, you started collecting Social Security “too early” and want to increase your lifetime benefit.
You can suspend your benefit payments voluntarily if you reach FRA before you turn 70. Every month you suspend your benefits, you will earn delayed retirement credits. This will result in a higher benefit payment.
At any time, you can request to resume receiving Social Security benefits. After you turn 70, though, Social Security automatically reinstates the higher amount of your benefits.FAQs
When am I eligible for Social Security benefits?
Your eligibility for full retirement benefits will depend on when you were born.
- Those born before 1938 have a full retirement age of 65.
- The age range for people born between 1938 and 1942 is 65 and two months to 65 and ten months.
- It’s 66 if you were born between 1943 and 1954.
- From 1955 to 1959, it ranges from 66 and two months to 66 and ten months.
- It is 67 if you were born after 1960.
You can begin receiving Social Security at age 62, but your benefits will be permanently reduced if you do. If you take retirement benefits at age 62 and are 66 at full retirement age, you are entitled to 25% less benefits.
Your retirement benefits will be higher if you wait until 70. For those born in 1943 or later, this is the maximum benefit period.
What are the criteria for eligibility?
The number of credits you earn during your working years determines your Social Security eligibility. In 2022, you will earn one credit for every $1,510 you earn, up to a maximum of four credits per year. In 2023, that will rise to every $1,640 you earn. If you were born in 1929 or later, you will need 40 credits or ten years of full-time work to qualify for Social Security benefits.
How much do I have to pay in?
Social Security will require workers to pay 6.2% of their wages up to $147,000 of income (160,200 in 2023). In addition, employers contribute 6.2%. Individuals who are self-employed must pay both portions or 12.4%.
What will I receive?
As a result of your lifetime earnings, you are eligible for Social Security benefits. Basically, it averages your 35 highest-earning years’ income.
Online estimates can be obtained if you have already accumulated 40 Social Security credits.
Is it possible to get Social Security if I work?
After reaching full retirement age, you can continue to work and earn. If you’re not at full retirement age, your benefits are temporarily reduced. There is no loss of money, however. Once you reach full retirement age, Social Security will credit you with a higher benefit.
In 2023, the reduction is $1 for every $2 over $21,240 of earned income for those less than full retirement age. Benefits will be reduced by $1 for every $3 you earn over $56,520 in 2023. The period continues until the end of the month when you become eligible.
Article by Albert Costill, Due
About the Author
Albert Costill graduated from Rowan University with a History degree. He has been a senior finance writer for Due since 2015. His financial advice has been featured in Money Magazine, Fool, The Street, Forbes, CNBC and MarketWatch. He loves to give personal finance advice to millennials.