6 Ways to Get the Most Out of Social Security

US News
checks
.

View photo

bFILE - This Feb. 2005 file photo shows trays of printed social security checks, in Philadelphia, waiting to be mailed from the U.S. Treasury. More than 56 million Social Security recipients will see their monthly payments go up by 1.7 percent next year. The increase, which starts in January, is tied to a measure of inflation released Tuesday. It shows that inflation has been relatively low over the past year _ despite the recent surge in gas prices _ resulting in one of the smallest increases in Social Security payments since automatic adjustments were adopted in 1975. (AP Photo/Bradley C. Bower, File)

Social Security took a cut out of every paycheck we ever earned, and the money was used to pay benefits to our grandparents, parents and older siblings. Now, finally, it's our turn, and it's only natural that we want our benefits, too. Yet the rules for collecting Social Security are incredibly complicated, and vary depending on your marital status, how long you worked, where you worked and when you retire.

Meanwhile, we hear dire predictions that Social Security is running out of funds, benefits will be cut and eligibility rules may change. Nobody knows what the long-term future holds, but under the current program, which is not likely to change much in the near term, there are six proven strategies to make the most out of the program:

1. Work a long time. Social Security says it figures your benefit by calculating "your average indexed monthly earnings during the 35 years in which you earned the most." So, obviously, one way to maximize your benefit is to put in a full career, working for at least 35 years. Maybe that seems like a long time, but look at it this way: If you retire at full retirement age (66 for most of us), you can still get the maximum benefit even if you didn't start your career until you were 31, or if you began working at age 21 and took off 10 years to raise children.

2. Have a good job. Social Security sets a maximum amount of salary that is subject to the payroll tax, currently $113,700 per year, which is the same amount of earnings it will credit toward your benefit. This amount is adjusted for inflation. The maximum amount in 2000 was $76,200, and in 1990 is was $51,300. This is easier said than done, but the way to maximize your benefit is to earn the maximum amount set by Social Security throughout your career. If you were earning at least $51,300 in 1990, $76,200 in 2000 and $113,700 today, you're eligible to collect the maximum benefit from Social Security.

3. Don't retire early. Workers are eligible to start taking Social Security benefits at age 62, but the amount you receive at 62 is discounted by about 25 percent. Also, if you start Social Security before full retirement age, and you earn more than $14,160 per year, the government starts temporarily withholding your benefits. Conversely, if you work beyond full retirement age, you receive a bonus of approximately 7 percent a year, up to age 70. There's no extra benefit to working past age 70.

4. Don't earn too much in retirement. If you're married and file a joint tax return, your Social Security benefits are not taxed if your combined income falls below $32,000. Half is taxed if your income is between $32,000 and $44,000, and 85 percent of your benefits are taxed if your income exceeds $44,000. If you had a good career and didn't retire early, you'll likely be subject to the 85 percent rule. Don't get upset; that's the one progressive aspect of Social Security. But there is one way around it: don't get married. Two singles can earn up to $50,000, instead of $32,000, before their benefits are subject to federal income tax.

5. Live in a tax friendly state. There's not much you can do to avoid federal taxes unless you take a vow of poverty, but you can do something about state tax. Most states do not levy income tax on Social Security benefits, including retirement havens like Florida, Arizona and the Carolinas. But about a dozen states do exact income tax on your Social Security benefits, including red states like Kansas and Utah as well as blue states like Connecticut and Vermont.

6. Stay in good health. By far the most important factor in how much you collect from Social Security is not how much you earned, but how long you stick around to collect benefits. You can work all your life, but if you die the day after you retire, all is lost. The best way to maximize Social Security is to eat right, go to the gym, get your annual checkup and in every other way take care of yourself so you can continue to collect that monthly benefit through your 70s, 80s and 90s.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.



More From US News & World Report

Rates

View Comments (784)

Recommended for You

  • More lenders are offering student-loan consolidations

    Dear Liz: I have four private student loans that I would love to consolidate so that I can have one medium-size monthly payment instead of four large ones. Answer: If you have good credit and sufficient income — or a willing co-signer — several lenders now offer private student loan consolidation.…

    Los Angeles Times
  • Everyone's Past Exposed on this New Website!

    A new site has made it simple to find the truth out about anyone online. It's as easy as typing in a Name and selecting a State!

    AdChoicesInstant CheckmateSponsored
  • CyberArk IPO Gets Boost as Breaches Trigger Industry Gain

    The data breaches that have rocked corporate America in recent weeks couldn’t have come at a better time for CyberArk Software Ltd . The Israeli data security company, which is seeking to raise as much as $80 million in an initial public offering in the U.S., is marketing its shares to investors…

    Bloomberg
  • Morgan Stanley Seven-Year Curse Spells Decline: Australia Credit

    Morgan Stanley says Australian bonds, the worst-performing government debt in the past month, have further to decline as investment-grade securities globally will stagnate for the next seven years. Australian sovereign debt due in more than a year lost 0.7 percent in the month ended Sept. 12, the…

    Bloomberg
  • 'No Good Deed' defeats 'Guardians' at theaters

    'No Good Deed' defeats 'Guardians' at theatersLOS ANGELES (AP) — It took a murderous Idris Elba and a pair of dolphin buddies to defeat "Guardians of the Galaxy" at movie theaters.The Sony thriller "No Good Deed," which stars Elba as an escaped convict

    Associated Press
  • Hundreds of workers on strike at Lear Corp. plant

    Hundreds of workers protesting what some are calling fast-food-like wages walked off the job Saturday at a Lear Corp. plant in northwest Indiana that makes automotive seats, beginning a strike that could affect a major Ford assembly plant in Chicago. The plant, about 28 miles southeast of Chicago…

    Associated Press
  • Global Banks' Lending Returns to `Substantial' Growth

    Cross-border lending by global banks rose by $580 billion in the first quarter, the first “substantial” increase since 2011, the Bank for International Settlements said. Cross-border claims of banks reporting to the BIS rose 2 percent to $29.4 trillion in the three months through March, the Basel,…

    Bloomberg
  • Play

    The Perils of Our Lopsided Income Growth

    The Fed's latest U.S. consumer finance report showed decent income growth overall--but not across the board.

    Morningstar
  • Tired of Living Paycheck to Paycheck?

    New website reveals how to save $1,000's when you're living paycheck to paycheck. See exactly how.

    AdChoices Media ForceSponsored
  • Asian stocks tumble as China anxiety saps confidence

    By Ian Chua SYDNEY (Reuters) - Asian stocks stumbled to their lowest in five weeks on Monday after a batch of weak data out of China raised the spectre of a sharp slowdown in the world's second-biggest economy. The Australian dollar, considered a liquid proxy for China plays, also took a hammering…

    Reuters24 mins ago
  • China's Alibaba sets new path with US IPO

    China's Alibaba sets new path with US IPO New York (AFP) - With a possible record-breaking stock offering, Chinese online giant Alibaba is set to boost its role as a global company with a massive expansion potential. The initial public offering (IPO), expected to raise between $19 billion and $24…

    AFP
  • Hedge Funds Cut Bullish Crop Bets to Lowest Since January

    Hedge funds cut bullish wagers on agricultural commodities to the lowest since January before the U.S. Department of Agriculture said Sept. 11. Three months of rain and mild weather created almost ideal growing conditions, spurring price declines that drove the Bloomberg Commodity Index to a…

    Bloomberg
  • Gold Industry Needs ‘Cleansing’ of Weakest, Fidelity Says

    The gold industry, recovering from the worst slump in prices in 30 years, needs more mergers to help improve investor returns and eliminate unprofitable mines, Fidelity Investments said. About a third of gold production is probably money-losing when the price of the metal is lower than $1,250 an…

    Bloomberg
  • If a Company Won’t Talk, Its Former Employees Will

    The Haggler has striven in recent months to get someone at Conn’s, a Texas-based chain that sells appliances and furniture, on the phone. What kind of place is Conn’s, and how does it operate? One of the customers is Justin Raizk of Tucson, Ariz., who last year walked into a Conn’s in his hometown…

    The New York Times
  • Central banks in driving seat this week

    Three central bank meetings will likely top the agenda for Asian markets this week, with particular focus on the U.S. On Wednesday, the Federal Open Market Committee ends its two-day review and traders are bracing for an increasingly hawkish tone from Fed Chair Janet Yellen. Last week, global…

    CNBC
  • American Express® Cards

    Earn Cash Back, Travel, or Points. Find the Card That's Right For You!

    AdChoicesAmerican Express®Sponsored
  • Are You Prepared for a Market Correction?

    When a bull market is roaring, preparing your portfolio for a correction or bear market might seem like closing the storm shutters on a sunny day. Although you don't need a financial adviser to do any of this, you will want to take a page from their book by building in some protection and sticking…

    Morningstar
  • Treasury Auctions for the Week of Sept. 15

    Treasury Auctions for the Week of Sept. 15 The Treasury’s schedule of financing this week includes Monday’s regular weekly auction of new three- and six-month bills and an auction of four-week bills on Tuesday. At the close of the New York cash market

    The New York Times
  • Bank of Portugal picks new CEO for BES successor Novo Banco

    By Andrei Khalip LISBON (Reuters) - The Bank of Portugal on Sunday picked a new chief executive for Novo Banco, successor to Banco Espirito Santo (BES), following the embarrassing resignation of its three top managers appointed only two months ago. Eduardo Stock da Cunha, 51, an experienced…

    Reuters
  • Retirees' big move (or not): What to consider

    Retirees' big move (or not): What to considerShould I stay or should I go? Many people nearing retirement grapple with this decision. Choosing whether to retire "in place" or move to a new location could make or break your nest egg. There are many factors

    CNBC
  • How Ferrari Fits Into the Plan for Fiat Chrysler IPO

    Luca Cordero di Montezemolo, chairman of iconic Italian automaker Ferrari, will leave his job on October 13, the day that the combination of Fiat and Chrysler is expected to begin trading as Fiat Chrysler Automotive on the New York Stock Exchange. Montezemolo has been Ferrari’s chairman for nearly…

    24/7 Wall St.
  • Bartiromo one on one with Mohamed El-Erian

    Russia is considering steeper counter sanctions against the West after the European Union instituted new sanctions against it. This as voters in Scotland go to the polls and vote this Thursday on whether to separate from the United Kingdom. Many people worry about a contagion if the Scots are…

    USA TODAY
  • Often Overlooked Method to Pay Off Mortgage

    If you own a home and pay for a mortgage, you could reduce your payments by an average of $4,100 a year. Here is how it works.

    AdChoicesRateMarketplaceSponsored
  • Swiss banks at crossroads as secrecy goes up in smoke

    As Switzerland's long-cherished banking secrecy practices evaporate, the institutions that helped create the world's largest offshore tax haven are dramatically rethinking their business models in a bid to survive. Under heavy pressure from international regulators looking to root out shady…

    AFP