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How Do I Maximize My Future Social Security Benefits?
Old 10-19-2011, 08:57 AM   #1
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How Do I Maximize My Future Social Security Benefits?

I want to retire as early as possible, but I would also like to maximize the amount of my future benefits.

In order to maximize my future Social Security benefits, is there a minimum number of years that I am required to work? Or, in order to maximize my future social security amount, is my annual salary the determining factor in obtaining the maximum amount that I can receive from Social Security? Thank you for your advice.
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Old 10-19-2011, 09:08 AM   #2
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Please see The United States Social Security Administration.

This website has information to answer most of your questions about social security.

Briefly, your social security Primary Insurance Amount (PIA) is based on your 35 highest average indexed monthly earnings that you have paid social security taxes on.
To maximize your social security you would need to work and earn greater or equal to the social security maximum taxable income level for the 35 years ending at your full retirement age then delay receiving benefits until you are age 70.
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Old 10-19-2011, 09:08 AM   #3
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The answer is both matter... how many quarters you work is part of the formula and how much you make....

IIRC, you need 40 quarters or 10 years to qualify...

Another thing that will help maximize your SS is to not die.... my dad died in his early 60s and did not get a penny from SS... so it does not matter what you do leading up to that point...
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Old 10-19-2011, 09:30 AM   #4
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Old 10-19-2011, 09:41 AM   #5
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Thank you for the information. 35 years? That seems like far too long for me to have to work!!!! I have worked full-time for 15 years so far, and that amount already feels like too long!!!! LOL!!!!

I guess if I want to retire early, I will need to accept the fact that I will not be able to maximize my social security income benefit amount.
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Old 10-19-2011, 02:37 PM   #6
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The effect of working fewer years depends on income. Look at the benefit formula and the concept of bend points where the replacement ratio goes down. Once you get the average of the 35 to the second bend point (4624 a month) the replacement ratio goes to 15% where as it is 32 percent between 4624 and 767 and 90% under 767 (2012 rates). So once you get above the second bend point additional years don't save a lot, but then of course at the age of the poster anything could happen since it is a number of years till they reach 62.
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Old 10-19-2011, 02:46 PM   #7
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Thank you for the information. 35 years? That seems like far too long for me to have to work!!!! I have worked full-time for 15 years so far, and that amount already feels like too long!!!! LOL!!!!

I guess if I want to retire early, I will need to accept the fact that I will not be able to maximize my social security income benefit amount.
I've run this through for myself using their online calculator. There's a fair difference between a "stop work" age of 50 and 55 in terms what they say I'd get at 62 -- but beyond 55 the returns really start to diminish. By that point, delaying taking it makes a much bigger difference than w*rking longer.

Stopping work at 55 only seems to produce a 7% lower benefit than if I stopped working at 62.
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Old 10-20-2011, 11:41 AM   #8
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Thank you for the information. 35 years? That seems like far too long for me to have to work!!!! I have worked full-time for 15 years so far, and that amount already feels like too long!!!! LOL!!!!

I guess if I want to retire early, I will need to accept the fact that I will not be able to maximize my social security income benefit amount.
For however many years you choose to work, you maximize the (annual) benefits of those years of work by not taking SS benefits till you're 70 vs. starting to take them as early as age 62. IOW, fund years between retirement age & 70 with savings.
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Old 10-20-2011, 04:48 PM   #9
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I've run this through for myself using their online calculator. There's a fair difference between a "stop work" age of 50 and 55 in terms what they say I'd get at 62 -- but beyond 55 the returns really start to diminish. By that point, delaying taking it makes a much bigger difference than w*rking longer.

Stopping work at 55 only seems to produce a 7% lower benefit than if I stopped working at 62.
This is what I found as well, and I had only paid into SS for 23 years at age 55.


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Old 10-20-2011, 07:38 PM   #10
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From SS point of view it doesn't matter when you start receiving you benefits. They pay out the same amount. They have an estimate of when you will die. You either start collecting less dollars early for a longer period of time or start collecting more dollars later for a shorter period of time. The advice to live long is the right advice. As long as you exceed their estimate of when you will die then you will cumulatively collect more than they will expect to pay out.

Of course, no one knows when they are going to die but if you are currently in ill health then you might reasonably expect that you won't make it to a ripe old age. In that case it might be better to start collecting earlier. The decision to take it later is more or less a guess about the your longevity.

SS is working with the statistics of large populations. The particulars of your individual situation are what you have to work with. There is no right answer.
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Old 10-21-2011, 08:15 AM   #11
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From SS point of view it doesn't matter when you start receiving you benefits. They pay out the same amount. They have an estimate of when you will die. You either start collecting less dollars early for a longer period of time or start collecting more dollars later for a shorter period of time. The advice to live long is the right advice. As long as you exceed their estimate of when you will die then you will cumulatively collect more than they will expect to pay out.

Of course, no one knows when they are going to die but if you are currently in ill health then you might reasonably expect that you won't make it to a ripe old age. In that case it might be better to start collecting earlier. The decision to take it later is more or less a guess about the your longevity.

SS is working with the statistics of large populations. The particulars of your individual situation are what you have to work with. There is no right answer.
To my knowledge, SS's assumed same payout is based on a fixed average age of death that is set by Congress. If that average age rises, SS can't adjust the the added benefit percentage per year one waits to take SS downward to compensate for expected greater payouts but has to get Congress to change that (If SS could make this percentage change on their own it could improve solvency.). Net, as average age rises, it pays the average person to wait to receive benefits at an older age. Of course the converse is true too.
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Old 10-21-2011, 08:44 AM   #12
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What do you mean by maximizing your benefit?

I'm not trying to be cute, but there are a couple things that popped in my mind (maximum monthly amount, or maximum lifetime amount?). One of the "issues" is in predicting how long you will live.

1. Waiting to take benefits will make the monthly check larger, but you've missed out on some checks (your train left the station later, so it has to go faster to catch up).

2. The reverse is also true (taking benefits early is neat, but over time that 2nd train is going to catch and pass you).


The way I understand it, benefits are based on your highest 35 years of employment and the age in which you begin taking them.

There is a maximum benefit amount....in 2011 the amount is $2,366
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Old 10-21-2011, 08:47 AM   #13
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The last few posts apply to a single person and I generally agree with the comments.

However, for a lot of married folks, it's a bit of a different question of how to maximize benefits (the OP's question)...

For a married couple, the question turns to "what is best for me", to "what is best for us". In that case, it's not an "automatic answer", IMHO.

Answering the OP's question to maximize (based on our actual situation) I would suggest getting married . In our case, we're will get much more than what we would have received, as indivudials.
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Old 10-21-2011, 06:21 PM   #14
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To my knowledge, SS's assumed same payout is based on a fixed average age of death that is set by Congress. If that average age rises, SS can't adjust the the added benefit percentage per year one waits to take SS downward to compensate for expected greater payouts but has to get Congress to change that (If SS could make this percentage change on their own it could improve solvency.). Net, as average age rises, it pays the average person to wait to receive benefits at an older age. Of course the converse is true too.
Whoever sets the age I guess we want to live longer than that.

Married couples can add some flexibility in my mind because it makes juggling maximum monthly benefit vs maximum life payout a little more interesting. I think it is common for the spouse with the lower salary to take SS early and the spouse with a higher salary to take it later.
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Old 10-22-2011, 05:00 AM   #15
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+1. This was my first reaction while reading the post. If you want to "maximize your benefit", then you need to work 35 years and earn as much as you can. If you want to "optimize your benefit", that is a different question altogether.
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What do you mean by maximizing your benefit?
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Old 10-22-2011, 05:55 AM   #16
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I have heard of people who take SS at 62 even though they don't need the money at that time. They use their SS payments to fund some type of investment - invest in stocks and bonds, or buy a rental property, etc.

I am not sure how this has worked out for them.
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Old 10-22-2011, 08:49 AM   #17
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I have heard of people who take SS at 62 even though they don't need the money at that time. They use their SS payments to fund some type of investment - invest in stocks and bonds, or buy a rental property, etc.
IMHO, it all depends on their financial situation.

In our case, we have substantial invested assets in the market (equity/bonds); we have no strong desire to add to that risk, by adding SS income to it.

Most of our investments are in tax-deferred funds. We don't desire to convert these funds to after-tax (e.g. Roth) due to estate issues - which I won't get into here. However, by doing a draw-down of tax-deferred vs. SS will have an effect on our excess RMD withdrawals at age 70.5. Excess RMD's are those withdrawals and tax paid on investments you are required to "cash in", but not needed for expected living expenses. Sure, the proceeds could be reinvested, but due to our estate situation, we desire to put of paying tax as long as possible.

As far as claiming early and investing in real estate? Not for us. I'm retired and have no desire to be a landlord (been there, done that). My goal is to make life more simple at my age, not necessarily improve my/DW's net worth beyond what we have, which allows us to live the life we planned for, in retirement.

For other folks? Draw at age 62 and invest in whatever? It might be a good option for them, but not for us - and our "emotional needs".

BTW, by my DW claiming SS at her FRA in just over 2.5 years, I'll be able to claim 50% of hers, so I will be getting a SS "check" even though delaying my own claim till age 70. Assuming that I pass before her, she will be able to get an adjustment that will equal my age 70 benefit (or whatever it would have been the day before I passed), along with the annual 8% increase (along with any COLA) benefit from age 66-69, for the rest of her life at a rate that will almost double her FRA benefit.

And if she passes early? Then I'll claim immediately; no need to wait.

Like all SS scenarios, it all depends what you require financially and also emotionally. No situation is the same...
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Old 10-22-2011, 10:10 AM   #18
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Answering the OP's question to maximize (based on our actual situation) I would suggest getting married .
Sure, if both spouses consistently make a decent income. We're not all in that situation, though I can see it working for yours. I can only dream of what could have been.
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Old 10-22-2011, 10:31 AM   #19
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I can only dream of what could have been.
I'll be the first to admit it; DW has "contributed" to my life, both emotionally and financially (however, emotion is more important, IMHO)...

Sometimes, we do get "lucky in love" ...
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