Are You Maximizing Your Social Security Retirement Income?
As an important component of retirement planning, it is crucial that all older Americans educate themselves on how to maximize their Social Security benefits to yield the best possible outcome for their future. However, according to a study by The Nationwide Retirement Institute, 91% of adults aged 50+ don’t know what factors, if any, affect their Social Security benefits. Here is some basic information to help you learn more.1
How does Social Security work?
In 2019, about 64 million Americans received Social Security benefits, according to the Social Security Administration – with the average monthly benefit at $1,479. But it’s important to remember that the actual amount of your benefits will depend on a number of different factors, including your (and/or your spouse’s) work history and when you opt to file. Social Security calculates your retirement benefit using your highest 35 years of earnings—regardless of when these years occur.
Based on the Consumer Price Index, Social Security payments have been increased by 1.6% beginning in January 2020. The average monthly payment for retired individuals is now $1,503, up from $1,479 in 2019. Retired couples will receive an estimated average of $2,531 per month, up from $2,491 in 2019.
When should I start collecting Social Security?
Even though Social Security benefits can be claimed as early as age 62, claiming them before you reach your full retirement age will result in reduced monthly benefits, even after you reach your full retirement age, as the Social Security Administration’s “Early or Late Retirement?” fact sheet explains.
The amount of benefit reduction will depend upon the actual type of Social Security benefit you are receiving. For example: Your individual retirement benefit is reduced by 5/9 of one percent (or 0.0056) for each month that you receive benefits prior to reaching your full retirement age.
Currently, the full benefit age is 66 for people born from 1943 to 1954, and it gradually rises to age 67 for those born in 1960 or later. If you wait to claim your benefits, until you reach your full retirement age or up until the maximum threshold of 70, your benefits will be greater than if you begin receiving payments early. For example: If you opt to delay taking your Social Security retirement benefits, your benefits will be increased by a certain percentage each year (depending on your date of birth). The percentage of increase is calculated using simple interest (not compounded). The increase will cease once you reach age 70 even if you have not yet taken receipt of your benefits.
Can I work and still receive Social Security benefits?
Yes, but your benefits will be reduced if you earn too much if you’re currently receiving monthly benefits and haven’t yet reached your full retirement age — so you should speak with a financial or benefits professional regarding your specific situation.
- If you’re under full retirement age during all of 2020, Social Security will deduct $1 in benefits from every $2 that you earn above $18,240/yr.
- If you reach full retirement age during 2020, Social Security will deduct $1 in benefits for every $3 you earn above $48,600/yr, until the month you reach full retirement age.
However, if you work and are already at your full retirement age or older, you may keep all of your benefits, no matter how much you earn.
Also, if you’re still in the workforce, be sure to check your current estimated benefits regularly. That way, you can have a more accurate financial snapshot of how much Social Security income to expect based on your earned income and plan accordingly if you’ll need to supplement it. (Please keep in mind that these are just estimates.)
Will I have enough to retire?
While many retirees rely on Social Security for their primary income, that doesn’t mean it will be sufficient to sustain your lifestyle. A good rule is that you’ll need 80% of your pre-retirement income to maintain your standard of living, according to the Motley Fool.
That’s why it’s important to run the numbers as early as possible. Factor in all sources of income in retirement — including Social Security, investment earnings and a pension if you have one. Also, find out if you are eligible for more than just your own retirement benefits. Even if you’ve never worked, you may be eligible to receive Social Security benefits based on your spouse’s earnings. And if you are married, divorced or widowed, you may be able to claim a "spousal" or "survivor" benefit based on the work history of your spouse or former spouse(s) — alive or deceased.
Using a reverse mortgage to supplement retirement income
For retirees considering a reverse mortgage, there may be some confusion about whether it affects your Social Security benefits. The fact is, you will still be able to receive your Social Security benefits even after you have completed the reverse mortgage loan process and secured a loan. Generally, funds from a reverse mortgage loan have no bearing on regular Social Security benefits.1 However, needs-based benefits — such as Medicaid and Supplemental Security Income (SSI) — may be impacted. It’s important to consult with a knowledgeable financial professional about your individual circumstances.
Reverse mortgage proceeds can be a great way to supplement your monthly income. They can provide a steady monthly cash flow for a set period of time, or as long as you live in and own your home — whichever you choose. This can be a great way to help alleviate the financial strain of living on a fixed retirement income.
Gain control of your retirement money
The income you will need during retirement is not always predictable. But at Reverse Mortgage Funding LLC (RMF), we can help you or a loved one prepare for a more comfortable lifestyle now and in the future. To find out more about reverse mortgages, call 888-277-1567 for a convenient phone appointment with an experienced reverse mortgage specialist.
1Consult a financial professional. Visit www.ssa.gov
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.
1Consult a financial professional. Visit www.ssa.gov
This information is intended for those who are interested in financial education. This information is provided for convenience only, and RMF makes no warranties concerning the accuracy or completeness of any of the information. Information is subject to change without notice, and RMF is under no obligation to provide updated information. Materials or statements made by a third party and located or posted on the Site are those of the third party and do not necessarily reflect the official policy or position of RMF. This is not financial, tax, compliance or legal advice and should not be taken or relied upon as such. Each individual should consult with his/her financial, tax, or legal professional. All mortgage origination services are provided by Reverse Mortgage Funding LLC, a state-licensed mortgage lender, which is licensed or otherwise exempt from state licensing in the states in which it originates mortgage loans.