Did you know that approximately 67 million Americans will be receiving a Social Security benefit per month in 2023? As an alternative, almost nine in ten Americans over 65 had received Social Security benefits by December 31, 2022. Social security benefits account for about 30% of the income of older people.
Knowing how to increase your Social Security benefits is crucial as they will be your primary source of income in retirement.
Many people don’t understand Social Security. They may also claim too quickly, miss out on vital benefits, or fail to use strategies that could increase their income.
These costly errors can be avoided by making these 10 essential steps to maximize your Social Security benefits during your golden years.
2023 Will See Big Changes in Social Security
No matter what your stage in retirement is, it is important to stay informed. Let’s start by reviewing the major changes that will affect Social Security and retirement in 2023.
Increases in COLA (cost-of-living adjustment).
The Social Security Administration will increase benefits checks by 8.7 percent in 2023. This is a significant increase from the 5.9 percent adjustment made for 2022. This COLA is 11.2 percent higher than it was in 1981.
Social security retirees will see an average $146 increase in monthly benefits starting January. This is due to the 8.7 percent adjustment. Retirees will now receive an average check of $1827, instead of $1681. Couples who receive benefits will see their estimated payments increase by $238 from $2.734 to $2.972.
CPI-W, the Consumer Price Index for urban wage workers and clerical workers, has been linked to the cost of living adjustments since 1975. The SSA compares the CPI-W of the previous quarter with the CPI-W of the current quarter to determine the COLA. The CPI-W changes are then used to adjust the COLA.
The maximum tax-free income is increasing.
Social security taxes were introduced in 2022 for maximum earnings of $147,000. This means that workers who contribute to the system pay tax on wages up to this amount. It is usually 6.2 percent.
In 2023, the maximum earnings will rise to $160,000. This means that more of a worker’s income will be taxable. Why is this happening? The adjustment was possible because of the higher average American wage.
Also read: 7 Tax Saving Ideas for Small Business Owners
Social Security benefits will also increase.
The Social Security benefit for workers who retire at full retirement age in 2023 will be higher, increasing from $3,345 up to $3,627. The full retirement age for those born after 1960 is 67. This applies also to retirees.
However, it is important to note that your maximum benefits if you retire before the full retirement age may be different as these benefits will be decreased. This is true even for people who retire before the full retirement age.
Spouses and disabled workers also see an increase in their benefits.
In 2023, benefits will be increased for widows and widowers as well as the disabled. These figures look like the following:
- A widowed mother of two children with two children can receive a substantial boost from $3,238 up to $3,520
- The benefits for widows and widowers who live alone at 65 or older will rise from $1,567 up to $1,704.
- The disability benefit for disabled workers who have a spouse or at least one child will increase from $2,407 – $2,616
These are only averages. Your situation and exact benefits may be different.
Social Security adjusts amounts exempted from the earnings test.
If you claim your benefits prior to reaching full retirement age, the Social Security Administration will withhold some of your retirement benefits. You can still claim a substantial portion of your benefits if you have retirement earnings that are exempt from the test. This is how the process will look in 2023.
You can earn as much as $1,770 per month ($21,240 per annum) before the SSA withholds your benefits. This is before you start to receive Social Security. You will get $1 for every $2 earned above the limit. The maximum exempt earnings for 2022 were $1,630 per month ($19,560 per year).
FYI: If you reach full retirement age within a year, this rule still applies but only until you reach full retirement age.
Benefits will be withheld at a $1 rate for each $3 earned over the limit in 2023, instead of $2 per $3 earned above that limit. In 2022, the ceiling was $4330 per month (51,960 per annum).
Full retirement will result in more benefits for workers who have retired.
The maximum benefits for Americans who retire at full retirement age in 2023 will increase depending on the year they were born. The maximum monthly benefit will rise to $3,627 per month from $3,345 per lună in 2023.
How to Maximize Social Security Benefits in 2023
Now that you have a refresher, let’s look at how to increase your Social Security benefits.
1. Postpone your application.
Your Social Security retirement benefits will increase by approximately 5% to 7 percent if you delay in claiming them. Between the earliest retirement age of 60 and your full retirement age, you can retire. For those born after 1960, this age rises to 67.
You will receive a greater return if you are able to wait until you reach full retirement age. Waiting until 70 to apply for benefits will give you 8% more. Why 70? This is the maximum benefit you can receive.
There are important things to consider before you decide to go this route.
People mistakenly believe they will not live long enough to claim benefits. According to a study done by The Brookings Institution, half of those who thought they wouldn’t live past 75 actually lived beyond that age. 75% of those who believed they would live to the age of 75 lived to that age.
Although the monthly benefit will increase each month that you wait to claim your benefits it’s not always a good idea to wait. If you live up to the average life expectancy, it doesn’t really matter whether you claim benefits early or later. Delaying your claim will result in a reduction in benefits.
However, most people aren’t necessarily average. People in poor health can benefit more if they apply early. A monthly infusion of benefits checks can help you manage your cash flow and pay off or reduce debt. This could lead to long-term cost savings.
2. Double-check your lifetime earnings.
It doesn’t really matter who you are, everyone makes mistakes. Even the Social Security Administration.
It is important to keep track of your income each year so you don’t make a huge mistake when applying for Social Security. Incorrect earnings records could result in you not getting the Social Security benefits that you are entitled to.
Incorrect earnings may be caused by a number of factors, including mistaken reporting by an employer or failure to process your name changes following a marriage or divorce.
To avoid any losses due to errors, ensure that your earnings statements are accurate each year. If you find errors, you may have to send your W-2s and pay stubs to the Social Security Administration. Once your claim is verified, the SSA will update your records.
You won’t likely have a paper trail going back at least ten, twenty, or more years. This makes it less likely that you can prove an error that occurred in the previous year if you have your records.
Good news! To view your earnings history, you don’t need to go to your local Social Security office. Why? This is possible online with my Social Security Account
If you find an error, please call 1-800-772-1213. You will also find details about Medicare, survivor, and disability benefits in your Social Security account. You can also start claiming your benefits immediately and receive a check as soon as you get it.
Also read: Top 30 Money Making Apps for Extra Income
3. Work longer.
To be eligible for Social Security retirement benefits, you must have 40 credits of work experience. You can earn up to four credits a year depending on your earnings. Earning $1640 will earn you one credit and $6,560 will give you four credits in 2023.
Your 35 highest-earning year is also used to calculate the benefits. Average earnings will be calculated for each year you do not have earnings.
Working longer can be especially beneficial for those who have taken time to care for their families, or taken time away from work. Remember that Social Security benefits may be reduced temporarily if you begin working before you receive them. A woman’s potential income could increase in later life than that of a man, which can lead to a higher return on working.
To determine whether you are eligible for Social Security, it is important to check your earnings statement before you retire. If you work for an additional year, your Social Security benefits may increase.
If you work an additional year after your first job, you might be eligible for Social Security benefits. Even if you were not covered by Social Security during your first job.
4. Make more money.
You can maximize your earnings and increase your Social Security check by working longer hours. Maxing out is a person who earns more than $160,200. This is the maximum income that is subject to Social Security’s 6.2% payroll tax. After you have reached your maximum earnings in all 35 years of your highest earning years, you will be eligible for full Social Security benefits. This will be $3,627 per month by 2023.
Self-employed people will often reduce the amount of income that is subject to payroll taxes when applying for Social Security. Inflation-adjusted income can be higher if you increase taxes in the short term.
5. Consider twice before you retire early.
Who hasn’t dreamed about retiring early?
Although it is tempting to start receiving your Social Security benefits at 62, the earliest age you can do so, you will not receive as much. Your benefits will be greatly affected if you retire at an older age. For example, a 62-year-old would get about 30% less in 2022 than a person 67 years older.
Don’t rush to retire early, however. Consider the pros and cons of each option. For example, if you have lower benefits, it could make it difficult to pay for your healthcare. According to the Fidelity Retiree Health Care Care Cost Estimate, an average couple will need approximately $315,000 (after taxes) for retirement healthcare costs.
You don’t have to live on Social Security alone. However, it is best to get 100 percent of your Social Security.
6. Include your minor child.
Your Social Security benefits may allow your children to receive checks. An unmarried minor child may share up to 50% of the pension or disability benefits of a primary worker. The child benefit is usually paid to children until they turn 18, although if they are still in high school, the benefit may continue until age 19.
However, child benefits can also be available if a child is disabled and began before the 22-year-old child was born.
A family may receive a maximum amount depending on the earnings history of one worker. The maximum monthly benefit at full retirement age is between 150% and 188% of the worker’s monthly salary. If your family benefits exceed this limit, your worker’s monthly check will not be reduced, but your dependents’ checks will be proportionately lower.
Be aware that family benefits can be cut or eliminated if the primary worker begins receiving benefits too early. This includes child and spouse benefits.
7. File for spousal benefits.
If you’re married, the spousal benefits equal 50 percent of your spouse’s retirement benefit. You can still receive Social Security benefits even if your earnings aren’t good. This includes if you care for a family member at home. Eligibility for spousal benefits starts at age 62. Eligibility for spousal benefits starts at age 62.
However, spousal benefits will be reduced if you claim them before your full retirement age. These benefits should be discussed with your spouse, including when and if it is a good idea to claim them.
Spousal Survivor Benefits
- About 4 million widows or widowers receive monthly benefits from the Social Security Administration. These benefits are based on the earnings records of their deceased spouse.
- Widows or widowers over the age of full retirement receive 100 percent of the deceased workers’ benefits. The following benefits are available to spouse survivors:
- Benefits may be reduced for spouses who have died within seven years.
- Benefits are reduced as early as age 60
Divorced Spouses Benefits
You may be eligible for Social Security benefits as a divorcing spouse in the event of divorce (up to 50% of benefits received by your ex-spouse). To be eligible, you must meet these requirements:
- Divorced from someone who is eligible for or has received Social Security retirement or disability benefits.
- You were married for at least ten years before the final divorce decree was issued.
- You must be a minimum of 62 years of age.
- Currently not married.
- You will not be eligible to receive the same retirement or disability benefits as your spouse who is divorced based on your work.
If your spouse is deceased, a surviving spouse benefit might be available. If you remarry after the age of 60, you will still be eligible to receive benefits.
Also read: Best Ways to Save Money for Retirement
8. Avoid or minimize taxes.
Federal income taxes may apply to up to 85% of your Social Security benefits if you have substantial outside income such as dividends or wages. Your adjusted gross income, non-taxable interest income, and half your Social Security benefits will determine how much income tax you pay.
Tax planning can help you avoid overpaying the IRS for Social Security benefits.
You might be able to make a qualified charitable donation from your IRA if you intend to give to charity. This will ensure that your taxable income is not increased, which makes your Social Security benefits more taxable.
9. Use a do-over.
If you decide to change your mind after applying for Social Security, all benefits will be refunded. You will get the same benefits as if you had not delayed your application. You can withdraw your application only once in your life. After 12 months it cannot be reinstated.
You are not suspending benefits if you withdraw your application. You can either suspend your benefits orally or in writing once you reach full retirement age. You must submit a withdrawal request within one year of the date that you filed SSA-521. This includes any Medicare premiums withheld from your paychecks.
10. Suspend your benefits.
Are you already receiving Social Security? Are you considering suspending or restarting your retirement benefits through Social Security Administration?
This should be considered when? You may be concerned that you have started to collect Social Security benefits “too soon” and would like to increase your lifetime benefit.
If you reach FRA (before you turn 70), you can choose to suspend your benefits. You will be eligible for delayed retirement credits each month that you suspend your benefits. This will result in a higher benefit payment.
You can ask to be reinstated in your Social Security benefits at any time. After you turn 70, though, Social Security automatically restores the greater amount of your benefits.FAQs