Not everyone is lucky enough to retire with a large pension or a bursting retirement account. For many, social-security payments play a major role in their retirement income. If you fall into this group, then the following tips can help you with your financial planning so that you can maximize your social-security benefits.
Tip #1: Plan for a later retirement
You can increase the amount of your monthly payment by putting off withdrawal for a few years. The earliest you can begin taking social security is at age 62, but the payments will be much lower then than they will be if you wait until full retirement age a few years later. If you don't mind working, putting off retirement for a few years means you can enjoy a larger monthly payment for the rest of your non-working years.
Tip #2: Know your spouse's benefit amount
In many cases, one spouse will qualify for much larger benefits than the other. This is especially true if one spouse spent many years as a homemaker or made much less than the other. In this case, it makes more sense for the lower-earning spouse to draw on the higher earner's benefits rather than their own. You can take 50 percent of your spouse's benefit amount rather than your own benefit amount. This can increase your benefits if your own amount was less than this.
Tip #3: Don't discount the benefits of your former spouse
If you are divorced and over age 62, and you haven't remarried, you can draw on your ex-spouse's benefits rather than your own. The marriage must have lasted at least 10 years in order for you to qualify to do this, however. This can result in a major increase of your retirement income if your benefits were drastically lower or if you haven't worked enough years to qualify for social security on your own. Your drawing on your ex-spouse's benefits will not affect either their or their new spouse's social-security payments.
Tip #4: Figure taxes into your earnings
You will need to pay taxes on your social-security benefits. As a general rule, these taxes are taken out before you are paid, so you won't need to file to pay your annual income tax. Medicare and prescription plan coverage will also be taken from your monthly social-security check before you receive it. When you are planning for retirement, consider the tax implications and Medicare deductions on your monthly payments so that you can be more accurate in determining your monthly income.
For more advice on planning for retirement, talk to a financial planner in your area.