Maximize Your Social Security Benefit

Maximize Your Social Security Benefit


When retirement time comes around perhaps the two most important sources of income are from a personal retirement account and your social security benefit.  Along with the advanced effort that goes into developing a retirement account, making regular contributions and monitoring its progress, it is also very important to devote similar effort to monitoring and understanding your social security benefit.

For starters, I highly recommend that you establish an online account with social security. To accomplish creation of an online account go to From the home page, select “create an account,” that will take you to the forms to complete for establishing your account. Once you have established an online account, you have the ability to view it as often as you like.

On the home page of your account is your estimated monthly benefit, assuming you retired at full retirement age. The estimated monthly benefit is partially based on your earnings record. The next line is the most recent year reported for your earnings record. Next to both of these numbers is a selection to see more details that underlie both of them.

Looking into the details of the estimated monthly benefit, you find your benefit at full retirement age, at age 70 and at age 62.  Right off you will see that early retirement significantly reduces the monthly benefit. Also, you should notice that waiting until age 70 will significantly increase the monthly benefit. The reduction for early retirement can be as much as -30% and the increase for delayed benefit can be as much as +32%. Of course, personal circumstances dictate when a person will apply to receive benefits, but in general, I counsel clients to delay to as close to age 70 as possible.

It is important to note that the estimated benefits are based on the assumption that you will continue to earn the same as your last reported year until full retirement age. Should you decide to retire before full retirement age, then the actual benefit will be different than this estimate.

The details behind the earnings record include a chart organized from the year you started reporting social security earnings to the latest year of reported earnings. I encourage you to check the accuracy of this chart by comparing it to your W-2(s) for as many years back as possible. At the top of the online record is a link to click for reporting errors in this record. Also, on lower right hand corner of the printed report is a toll free number to call for any mistakes you find.

Hopefully, to this point everything has been straight forward and easily understood. The situation becomes much more complex as you try to interpret the language, terminology, and rules to develop a benefit strategy. Unfortunately, there is no “one size fits all” social security benefit strategy. For instance, the first line of the Estimated Benefits section uses the term “credits,” as in “you have earned enough credits to qualify for benefits.” This term refers to the requirement that you must have 40 credits (for anyone born after 1929) to qualify for benefits. In 2015, a credit is earned for each $1,220 earned per calendar quarter.  Also, a person who earns $4,880 during 2015 will earn four credits regardless of whether the earnings actually occurred in all four quarters of the year. I know, this contradicts my previous sentence, but also perfectly illustrates my point.

Your objective is to maximize your benefit by applying for the right benefit, at the right time, in the right way. To accomplish this you have to understand the rules for the type of benefit for which you are applying (e.g. personal retirement, spousal benefit, divorced spousal, survivor, family, or disability) and the circumstances in each situation that will maximize your benefit. In a subsequent article, I will focus on strategies for the personal and spousal benefit.

Suffice it to say that achieving this objective requires study and effort to develop a plan for optimizing your social security benefit. For this reason, I ask that you start to develop your plan well before the age of 62. A word of caution: the social security staff is not trained to help you develop the best plan for your benefit. They are trained to help you apply for benefits in the fastest way possible. You may decide to make an appointment to meet with a social security representative, but it is recommended that you have a clear understanding beforehand of how the rules apply to your situation and the goal you want to achieve.

In composing this overview I have found the following resources to be helpful:

Blankenship, Jim. A Social Security Owner’s Manual. 3rd. ed. Lexington: CreateSpace Independent Publishing Platform. 2014. Print.


Kent Butcher, MBA is Vice President &  Chief Operating Officer as well as a Registered Investment Advisor Representative at UPAL.

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