By Ehsteem Arif
Published on:
Social Security is a crucial support system for many Americans. Approximately 71 million U.S. citizens receive Social Security payments through programs like SSI, SSDI, and VA benefits.
While it wasn’t initially intended to be the primary income source for retirees, it has become a vital safety net for those with low income. Here, we look into simple ways to increase your Social Security benefits in 2024.
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The Social Security Administration (SSA) calculates your benefit amount based on your 35 highest-earning years. If you have fewer than 35 years of earnings, the SSA will factor in zeroes, which can significantly reduce your benefit amount. Therefore, working for at least 35 years ensures that these zeroes are minimized, potentially increasing your monthly benefits.
Your benefits are based on your lifetime earnings, adjusted for inflation. To maximize your benefits, aim to increase your earnings as much as possible before retiring. This might mean working full-time or even taking on additional part-time work.
Be aware of the earnings cap, which was $160,200 in 2023 and is $168,600 in 2024. Earnings above this cap are not considered in your benefit calculation, so focus on maximizing your earnings up to this limit.
Delaying your retirement beyond your full retirement age (FRA) can significantly increase your benefits. The FRA in 2024 is 66 years. For instance, if you delay until 70, your benefits could increase by up to 8% per year, making a substantial difference. If your FRA benefit is $2,000 per month, delaying until 70 could boost your annual benefit to $31,680 from $24,000, totaling a significant increase over your lifetime.
If you were born before January 2, 1954, and have reached FRA, you can claim spousal benefits and allow your own benefits to grow. This strategy is known as a “restricted application.” It permits you to collect benefits based on your spouse’s earnings record while deferring your own, leading to a higher benefit amount when you eventually switch to your benefits at age 70.
Knowing the tax implications of your benefits is crucial. Depending on your income, up to 85% of your Social Security benefits might be taxable. To minimize taxes, consider strategies such as withdrawing funds from non-qualified accounts during the “tax honeymoon” period between retirement and age 72, when you’re not required to take distributions from IRAs and 401(k)s. This can help manage your taxable income and reduce the tax burden on your Social Security benefits.
Increasing your Social Security benefits requires strategic planning and a good knowing of the rules. Working for at least 35 years, maximizing your earnings, delaying retirement, taking advantage of spousal benefits, and minimizing taxes can all contribute to higher monthly benefits. It’s essential to stay informed and make decisions that align with your financial goals for retirement.
Work for at least 35 years, maximize your earnings, and delay retirement.
Consider delaying until 70 to maximize benefits.
The FRA in 2024 is 66 years.
Yes, up to 85% of benefits may be taxable based on your income.
Yes, if you were born before January 2, 1954, and have reached FRA.
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A tax law expert with a knack for breaking down complex regulations into digestible insights. Ehsteem's articles on the tax news blog offer invaluable guidance to readers navigating changes in tax legislation.
