How Can I Get the Most Out of Social Security?

If you're not asking yourself, "How can I get the most out of Social Security?" perhaps you should be. For many Americans, Social Security is a big, big deal. Indeed, accordingto the Social Security Administration itself, the majority of elderly beneficiaries get 50% or more of their income from Social Security, while 22% of married elderly beneficiaries and 47% of unmarried ones get fully 90% or more of their income from Social Security. Here are some tips to help you get as much as you can out of the program.

Work the formula

The formula used to calculate your benefits is based on the income you earned in your 35 highest-earning working years. So if you have only 31 years of work when you retire, the formula will be plugging in four zeros for four years. That's not ideal. One way to get the most out of Social Security is to be sure and have 35 years of earnings. Remember, too, that the greater those earnings are, the fatter your Social Security checks will be. So it can pay off to boost your earnings as much as possible, perhaps via a temporary part-time job, or by seeking raises more aggressively, or even changing jobs. If you have 35 years but some of them feature paltry earnings, it can be worth working an extra year or two at a good income in order to replace some weak years.

Consider delaying starting to collect

The most obvious way that people boost their Social Security benefits is by delaying when they start collecting them. For every year beyond your full retirement age that you delay (up to age 70), your benefits will increase in value by about 8%. If you delay from 67 to 70, you can make your checks fully 24% bigger. That's enough to turn a $2,000 monthly benefit ($24,000 per year) into a $2,480 one (nearly $30,000 annually).

That's an effective strategy, but it's not quite as powerful as it seems -- because as the Social Security Administration has explained, "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between." After all, delaying starting to collect from age 67 to age 70 means you'll miss out on three years' worth of payments -- that's 36 payments.

Make sure to include Social Security in your overall retirement plan. Image: iStock photos

Make Social Security part of your overall plan

Another answer to the "How can I get the most out of Social Security?" question is to be sure you incorporate Social Security in your overall retirement plan. You may be assuming that you'll work as long as possible and make your ultimate benefits as large as possible, but consider other possibilities. Figure out how much you'll get from Social Security if you retire at 62, and perhaps 64 and 67, too. Figure out how much income you're likely to need in retirement and where it will come from. You might find that you'll have enough to get by on even if you start collecting benefits at age 62. If so, give some serious thought to retiring then, in order to maximize your happiness.You may not need to delay retirement too much.

Stretch benefit dollars further

If you're collecting Social Security checks and find that you have money left over each month, consider socking some or all of the excess away in investments instead of spending it. You might, for example, park it in very sturdy dividend-paying stocks and then collect income from them. (Just be sure you're not investing any money you'll need within the next few years, as the stock market can be volatile.)

Make the most of death, disability, and divorce benefits, too

Social Security is not just all about retirement. If your spouse passes away, you may be able to claim survivor benefits -- and your children may receive them, too, through age 17. Many divorcees don't realize that they may be able to claim benefits based on their ex-spouse's earnings -- even if that ex has remarried. Social Security offers disability benefits, too, to people of all ages who qualify.

Learn about claiming strategies

Much about Social Security is relatively straightforward. But it can get tricky, too, especially when you start learning about claiming strategies. That's because your decision regarding when to start collecting isn't as simple as deciding between small checks at age 62 or much bigger ones at age 70. If you're planning to start collecting benefits before your full retirement age and want to work some then, too, learn how much you can earn before your benefits start getting reduced. (The SSA explains: "If you're younger than full retirement age during all of 2016, we must deduct $1 from your benefits for each $2 you earn above $15,720.") If you're married, there are a bunch of strategies the two of you might employ that can increase your total benefits. A spouse who never worked much, for example, may be able to collect spousal benefits worth 50% of the higher-earning spouse's benefits -- and a higher-earning spouse might want to delay starting to collect benefits in order to increase his ultimate checks. The more you learn, the more you might collect.

The best answer to the "How can I get the most out of Social Security?" question is to learn a lot more about Social Security. Don't be afraid to consult a financial professional, too. The cost of that could be more than made up for via a smarter claiming strategy and increased benefit checks.

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