Over 66 million Americans rely heavily on Social Security to meet their daily and monthly financial obligations once they have retired or are nearing the end of their working lives. But, the monthly payments are only sometimes significant, and there are alternatives for retirees to boost their benefits. Here are four ways to maximize your Social Security benefits and ensure a comfortable retirement income.
Put in at least 35 years before retiring.
Primary insurance amount refers to a retiree’s total benefit entitlement (PIA). For persons born in 1960 or later, the PIA eligibility age is 67. The number of years a retiree has worked and, hence, paid Social Security taxes is cultivated by the Social Security Administration (SSA) to establish the retiree’s PIA. For the PIA, the SSA considers a person’s earnings over the previous 35 years. A person’s benefits will be substantially reduced if they don’t have 35 years of earnings history. You should have at least 35 years of job experience.
Boost your income.
But, it is simpler to say than to execute. However, your PIA is primarily determined by your highest 35 years of earnings. Therefore, the more you make now, the more you can expect to get in retirement from the Social Security Administration. It would be best if you aspired to earn more money throughout your working life, as the Social Security taxes you pay will be returned to you as retirement benefits.
Remember that the Social Security Administration can only withhold taxes from your salary up to the benefit base amount. However, the benefit base usually measures up to a substantial wage. Increased from 2024’s $147,000 to this year’s $160,200, the benefit base is now more generous than ever.
Put off benefits
Benefit eligibility begins at 62 and ends at 70, at the recipient’s decision. Yet, an early benefits claim has a penalty that might be pretty severe. If you were born in 1960 or after, your benefits would be reduced by 30% if you start collecting at age 62.
But if you wait until you’re 70, your benefits will grow. Social Security payments grow 8% annually, or 2/3 of 1% per month if you wait to claim them. Your Social Security benefits will increase by 24% if you delay retirement until age 70 if your full retirement age is 67.
Learn the ins and outs of the Social Security tax.
Regarding Social Security, there are various tax regulations to consider. To minimize your Social Security tax liability, consult an accountant or educate yourself on as many of these strategies as possible.
If, for example, your total income (including half of your Social Security payments and any other income you receive) is above a set threshold, you might be expected to pay taxes on as much as 85 percent of your incentives. Twelve states also impose taxation on Social Security income.
The Bottom Line
Taxes on Social Security benefits can be reduced in several ways, including by giving RMDs from an employer retirement account or rearranging the method in which traditional IRAs and Roth IRAs are held. It would help if you knew how these factors affect the taxes you owe on your benefits.