4 Little Known Strategies to Boost Your Social Security Income
Whether you are collecting social security benefits now or looking forward to that day at some point in the future, there are some options a lot of people just aren't aware of. They may or may not apply to you - everybody's situation is different - but they're good to know about in case one of these strategies might be appropriate for you.
The first strategy is what we call a "Social Security do-over." Did you know that you could re-start your social benefits? Say you decided to start collecting retirement at age 62. Maybe you didn't know the benefit increases approximately 8% per year, every year from 62 to 70. Since the difference between retiring at 62 and 70 is about a 32% increase, you might wish you had waited a few years to get that higher benefit.
The good news is, even if you've already started taking early Social Security income, regulations allow you to pay back the benefits you've already received and then re-apply for the new, now higher, benefit.
Of course, the down-side is you have to pay back the prior benefits you've received, and it's not just the net income, it's the gross income. If Social Security took out Medicare payments or taxes you have to pay back that money too. The upside is you can amend your prior year's tax return, you can get a little bit of a tax refund.
In order for the do-over to really work, you have to have the money to be able to pay back the prior benefits that you've received to start collecting a higher benefit. And of course the biggest downside is if you pass away shortly after starting to receive your new, higher Social Security benefit, you might not have collected enough benefits at the higher rate to cover what you just paid back. It really depends on a lot of different factors to decide whether or not a Social Security do-over makes sense for you.
The next strategy is sometimes called a "file and suspend" strategy. For example, a husband would file for benefits, and his wife would file for spousal benefits, which would be roughly half of the husband's benefit - assuming the husband is the higher income earner. The husband would then request a suspension of his benefits, if he's still working, or they don't need his Social Security income. His wife would continue to receive the spousal benefit while the husband's benefit continues to grow at 8% a year until he actually started taking payments.
Another strategy is to restrict benefits to spousal benefits only. Again, we'll use a husband and wife as an example. Let's say the wife stopped working and is collecting Social Security benefits calculated on her work history. The husband is still working and hasn't begun collecting Social Security. As long as he is at full retirement age (usually age 66) he can start receiving spousal benefits based on his wife's Social Security amount. Which means he would get half of his wife's Social Security income each month, while still allowing his own benefits to grow. Then at age 70, he would stop receiving a spousal benefit and file for his own full Social Security benefits. This scenario would give him 4 years of some Social Security income he would not have had to begin with.
And finally, the fourth strategy. If you're divorced and were married at least 10 years, you can file for benefits based on your ex-spouse.
These four strategies are a little bit more involved that what we've skimmed the surface of here. But for the right set of circumstances, any one of these strategies may be beneficial to you and help increase your retirement income.