3 Surprising Ways to Maximize Your Social Security Benefits
If you’re like the majority of Americans, Social Security benefits will likely account for a large amount of your retirement income. According to figures from the Social Security Administration, roughly 37% of men and 42% of women rely on their benefits for at least the majority of their retirement income.
It never hurts to take steps to increase your benefit amount, regardless of how much you intend to rely on your monthly payments in retirement.
While there are many methods to earn larger paychecks and keep more of them (such as working longer or increasing your revenue), these three are sometimes ignored. You could get more from Social Security than you think if you use any of these tactics.
1. Change Your State Of Residence.
While your Social Security benefits are taxed, each state has its own set of rules and regulations regarding the tax.
Some states levy no income taxes at all, while others exempt Social Security benefits from taxation. There are 37 states that do not levy a tax on Social Security benefits. North Dakota, Colorado, Connecticut, Kansas, Missouri, Minnesota, Montana, New Mexico, Nebraska, Rhode Island, Vermont, Utah, and West Virginia are the only 13 states that tax benefits.
If you live in one of those states now, you may be able to maintain more of your benefits if you relocate. However, before you pack your belongings and move to another state, you should think about all of the fees involved. While you may receive larger Social Security benefits, you may also face additional expenses such as higher living costs, property taxes, or sales taxes.
2. Make a Roth IRA contribution
Your Social Security benefits are nevertheless subject to federal taxes regardless of where you live in retirement. However, by putting more of your retirement assets into a Roth IRA, you can minimize or even eliminate these taxes.
Your combined income, which is half of your yearly Social Security payment plus all other income sources, such as retirement account withdrawals, determines how much of your benefits may be subject to federal taxes. You’ll owe federal taxes on at least a part of your benefits if your combined income is more than $25,000 per year (or $32,000 for married couples filing jointly).
Withdrawals from a Roth IRA, on the other hand, are not included in your total income. The more assets you put into a Roth IRA, the lower your total income would be — and you may be able to avoid paying fed taxes on your benefits entirely.
3. Consider Other Benefits
Most employees are entitled to retirement benefits, but you may also be eligible for spousal, divorce, or survivors’ benefits, depending on your circumstances.
Those who are married to someone who is qualified for Social Security benefits are eligible for spousal benefits. The most you can get is half of what your spouse is entitled to when they reach full retirement age. If you are eligible for more based on your own work history, then you are not eligible for spousal benefits.
Divorce benefits are comparable to marriage benefits, with the exception that you cannot be married right now and your prior marriage must have lasted at least 10 years. The fact that your ex-spouse has remarried has no bearing on the number of divorce payments you are entitled to.
You may be eligible for survivors benefits if a family member passes away. Widows and widowers are usually eligible for these payments. Parents, ex-spouses, children, and other family members may also be eligible. Because the amount you can receive is contingent on several criteria, it’s advisable to check with the Social Security Administration (SSA) to see if you qualify for survivors payments.
Benefits from Social Security can have a big impact on your retirement quality of life, so take advantage of them. You may increase your advantages and spend your senior years more comfortably with a little innovation.
Points to Remember
- Where you live in retirement may have an impact on your benefits.
- You might increase your Social Security payments by contributing to a Roth IRA.
- You may be eligible for divorce, spousal, or survivors benefits in addition to retirement benefits.
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I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
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