3 ways to maximize Social Security benefits

By Kevin Startt

Startt Planning!


With Social Security coming, what pitfalls should we avoid to maximize this program to our family’s benefit?

“I counted on Social Security to buy clothing, food and trips. So now I’m on Social Security and mostly use it for tips. “That joke came out during the 1970s, when Social Security was only a supplement to a leisurely retirement of golfing and cruising around the world.

By comparison, the retirement of tomorrow will be all about working, according to 75 percent of workers surveyed by Bankrate recently. The blessing in the stats, however, is that 39 percent of those surveyed say it’s because they like to work. I count myself among them; although, like millions of others, I’m not crazy about being laid off during my peak earning years because some company can’t afford a benefits package.

So, we start over with joy, providence and excitement, as millions are doing. The fastest growing group of entrepreneurial start-ups is in the 55-64 age demographic. With Social Security coming, what pitfalls should we avoid to maximize this program to our family’s benefit?

1. At today’s interest rates, do not take Social Security at age 62 or normal retirement age — The best annuity out there is to delay Social Security. Through delaying to age 70, the top wage earner can earn the taxable equivalent of 8 percent. Where today can you go and earn 8 percent tax deferred? The last time I looked, the top rate on a single premium fixed annuity for 8 years was a little north of 3 percent. If you do not need all your income, put the difference into an avenue such as an income annuity that will supplement income later. Through delaying Social Security, the top benefit of $30,000 is really worth a little over $60,000 in 2021 dollars at today’s inflation rate, using the rule of 72 .

2. Use spousal strategies for the higher wage earner to start claiming benefits at age 66 — For married couples, the higher wage earner might claim a benefit, then immediately suspend the benefit and collect a "spousal benefit" starting at age 66, while collecting the equivalent of 32 percent in delaying his higher benefit. This works if the income or medical benefit under Social Security is not needed. Through deferring this additional benefit, the higher earning spouse can also find solutions that provide long-term care access, chronic illness benefit and enhanced death benefits that Social Security by itself cannot provide.

3. Do not take IRA or other retirement withdrawals that will increase adjusted growth income and make more Social Security income taxable — Do not utilize alternative supplemental vehicles like private purpose municipal bonds if your earnings are over $44,500 filing jointly, because Social Security income can be taxed at up to 85 percent rates, whereas tax deferred income for life is not subject to these thresholds for taxable income.

Pre-retirees and other chronologically-gifted, calendar wise, red zone, soon-to-be-working-less seniors are looking at Social Security differently in the new millennium. If you are retired, Social Security is like seeing the minister’s wife in a low-cut gown. It’s not much but can’t look down. Eyes up and onward to using Social Security wisely and prudently.