Social Security Maximization
‘Knowledge is power’ in at least one practical sense: it equips a person to make wiser decisions. Ed Viesturs, arguably the greatest mountaineer America ever produced, understood this principle when he read “Freedom of the Hills”, a 567page manual on mountaineering, twice cover to cover before putting a pair of crampons on. Warren Buffet consistently makes more profitable investment decisions than most investors because he knows more about the financial condition of the businesses he purchases. Consider the following ways you can increase your knowledge of the Social Security (SS) program to help maximize future benefits:
Understand payments are based on earnings from your 35 highest income years, and that benefits are reduced for every year under 35 you didn’t work. Consider working until the 35-year mark is reached, even if it requires a part-time job in early retirement.
Since benefits are also based on age, know your full retirement age (FRA), between age 65 and 67 for most, and the reduction of benefits for those receiving them before FRA by $1 for every $2 earned over $22,320 (2024).¹ Post full-time employment, working part-time and deferring benefits until FRA, especially if the 35-years aren’t yet attained, or if it is but the part-time earnings replace a lower earnings year, can be a highly beneficial strategy, especially for those who live a long life.
Time your ‘start date’ (see Implications of the SS Start Date) for maximum benefits, and to complement other income sources. For those working full-time past FRA, future benefits continue to increase until age 70. For those who regret ‘triggering’ benefits too early, benefits can be suspended between FRA and age 70, and the claim itself can be withdrawn by repaying total benefits received.
Have a spousal-benefit filing strategy. Lower-earning spouses can file earlier while the higher-earner’s benefits increase to age 70, at which time the couple can switch to filing on the higher-earner’s income history. Know which strategy best fits into your personal financial plan.
Review your ‘Yearly Earnings Record’ reported on the annual SS statement and notify Social Security Administration of underreported income.
Up to 85% of SS benefits are taxable.² Discover what portion of your SS benefit will be taxable and include it as you work out the logistical intricacies of your future retirement income. Have your investment advisor and tax planner work together to help achieve maximum tax efficiency over your lifetime.
Knowledge of mountain weather told Ed Viesturs to sit in his tent and drink hot tea during the 1996 storm that claimed the lives of a dozen climbers on Mt. Everest, including several of Ed’s dear friends, and then he summited in grief to honor their lives in the following weeks. The knowledge you gain of Social Security, in particular your earnings history, taxability of benefits, and claiming options, and the corresponding wise decisions you make on this issue, could be as financially beneficial to your family as Ed’s great decision was to his that fateful day.
Think about it and may your celebration of Easter be enlivened by an unshakeable hope in a resurrected Savior this week!
Your friend, Shaun.
“If you confess with your mouth that Jesus is Lord and believe in your heart that God raised him from the dead, you will be saved.” ~Romans 10:9
1 Social Security Administration, March 28, 2024 www.ssa.gov
2 Smart Asset, “10 Strategies to Maximize Social Security Benefits”, August 18, 2023, by Rebecca Lake
The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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