Friday, May 20, 2022

How To Increase Social Security

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No : Look Into Survivor And Disability Benefits

Horsford looks to pass bill to increase Social Security benefits for seniors

You may be able to get more money from Social Security than you thought if you’ve been widowed or are disabled or related closely to someone disabled. That’s because Social Security offers survivor and disability benefits and even retirement benefits for dependents of retirees in some cases. If your spouse passes away, you may be able to claim survivor benefits and your children may receive them, too, through age 17. Social Security offers disability benefits, also, to people of all ages who qualify.

But Rising Medicare Premiums Will Take Some Away

Adding 5.9% to your check is just the first part of figuring out what your monthly Social Security payments will look like in 2022. That’s because chances are you’ll have Medicare Part B premiums withdrawn directly from your checks.

Medicare Part B premiums are increasing by $21.60 per month from 2021. While premiums last year were $148.50, they’ll be going up to $170.10 in 2022. That means if you’re on track for the average $92 raise, you’d be left with just $70.40 of it after the extra Medicare costs come out of your check.

Medicare premiums will be $170.10 for most retirees unless their income is very high. So, if your monthly benefit is just $1,000 and you’re in line for a $59 per month COLA, you’ll still face the same premium increase. It will reduce your $59 benefit bump down to just $37.40 per month.

Social Security Doesn’t Go Very Far

The idea that Social Security benefits can fund your retirement is a very misleading impression that many U.S. citizens have. The average monthly payment is approximately $1,543, totaling an annual income of $18,516 per year.

The U.S. poverty line is $12,880, which is unrealistic to live on. The average rent in the United States is $1,124 per month, which alone would consume more than 70% of your Social Security payment if you rented instead of owning a home outright.

The average car payment in the United States is nearly $400 per month for used cars. Even if you are reasonably thrifty, it’s tough to get by on Social Security. There are endless examples of how SSI payments fall short of real-world costs of living. A 2016 study showed that women spend up to 70% of their retirement on healthcare alone!

Sadly, an increasing number of retirees are leaning on Social Security as pension plans are steadily being phased out of corporate benefits. The 5.9% increase that retirees will see is good news, but with inflation hitting more than 6% as measured by the Consumer Price Index in the months since the 2022 increase was finalized, retirees are still losing purchasing power.

U.S. Inflation Rate data by YCharts

Also Check: How Can I Determine My Social Security Benefits

Take Care Of The Kids

Older men who are widowers or divorced often get remarried to younger women, and it’s not uncommon for them to start second families. So when these do-over dads start collecting Social Security benefits, they may still have minor children at home. More than 500,000 children currently receive monthly payments based on a parent’s Social Security retirement benefits.

If you’re in this situation, you can put aside the money for your kids — you might even be able to get Uncle Sam to foot the bill for their college education. That’s what one 67-year-old man in Austin, Tex., plans to do. Although he didn’t want us to use his name, “Bill” was happy to share his story.

After the death of his first wife several years ago, Bill married a younger woman, and they’re expecting their first child this year. When the baby is born, he or she will receive monthly Social Security checks worth up to half of Bill’s benefit until the child reaches age 18.

Bill plans to stretch those benefits even further by depositing them in a state-sponsored 529 college-savings plan. By contributing to a 529, he’ll be able to use the earnings and distributions tax-free to pay for tuition, books, fees and other qualified expenses. If the child received $500 a month, for example, and the account earned an average 5% annual return, the college fund would be worth about $175,000 in 18 years. Depending on where you live, you may also qualify for a state income-tax deduction on your 529 contribution.

Social Security: 10 Smart Ways To Get More Benefits

Social Security recipients will see 2 percent boost in ...

Without Social Security benefits, 22 million Americans would be poor per a report from the Center on Budget and Policy Priorities. About 21% of married elderly beneficiaries and 44% of unmarried ones get fully 90% or more of their income from Social Security, while about 48% of married elderly beneficiaries and 69% of unmarried ones get 50% or more of their income from it, according to the Social Security Administration.

How much money are we talking about? Well, the average Social Security retirement check was recently $1,417, or about $17,000 annually. If that doesn’t seem like much, know that there are ways to increase your benefits. Here are 10 strategies to consider:

  • Check your record
  • Work for at least 35 years
  • Earn more
  • Delay starting to collect your benefits
  • Start collecting early, at 62
  • Collect a spousal benefit
  • Don’t earn too much if you’re working in retirement
  • Delay your divorce
  • Look into survivor and disability benefits
  • Strategize
  • Let’s examine each in more detail.

    Read Also: Socia L Security

    Work For At Least 35 Years

    The Social Security Administration uses your 35 highest-earning years to calculate your primary insurance amount , which is the monthly benefit amount you receive as of your full retirement age. If youve worked fewer than 35 years, Social Security uses zeroes in the calculation for the non-earning years.

    That means beneficiaries with fewer than 35 years of income can make a big difference in the size of their benefit by continuing to work and getting some of the zeroes replaced with positive income numbers.

    Brotman also suggests strategically increasing your yearly income, if possible, to help maximize your future benefits.

    The first $142,800 of income is subject to Social Security taxation and also used to calculate future benefits, he notes. If you are earning less than that figure, consider a second job or side hustle to increase your contributions into the system and youll be setting yourself up for a larger future benefit.

    Work At Least The Full 35 Years

    The Social Security Administration calculates your benefit amount based on your lifetime earnings. The SSA adjusts your earnings, indexing them in order to take into account changes in average wages since the years you received those earnings. Then the SSA totals your earnings from your 35 highest-earning years and uses an average indexed monthly earnings formula to come up with the benefit you will receive at your full retirement age.

    If you entered the workforce late or had periods of unemployment, those years will count as zeroes, which will be included in the formula, bringing down the average. Once you have worked 35 years, each additional year of earnings will replace an earlier year of lower earnings, which will increase the averageand hence, your benefit.

    Recommended Reading: Social Security Benafits

    Maximize Your Income With A Social Security Payout Increase

      One out of five people in the U.S. receives Social Security payments. While many of these people are retired, others have permanent disabilities or are dependents of workers who have died. Social security was created as a safety net for workers and their survivors.

      Social security provides income that increases with inflation. Even a small increase in your initial benefit will result in a larger payment each year after you retire. Taking certain actions now and later will allow you to increase the amount of Social Security benefits you will receive, which can help boost your financial security in retirement.

      Social Security Benefits For Workers Turning 60 In 2020 Will Very Likely Drop Due To The Coronavirus Pandemic

      Social Security checks to increase for recipients

      Congress could pass legislation that would prevent this outcome.

      As a result of the COVID-19 pandemic, about 3 million retired workers who turn 60 years old in 2020 will very likely have much lower lifetime Social Security benefits than previously expected. Without legislative changes, the average earner stands to lose nearly $1,500 per year for the rest of their life. Fortunately, there is a simple legislative changeexplored in detail belowthat would fix these problems without lowering the benefits of any other cohort of retirees. Chairman of the U.S. House Ways and Means Social Security Subcommittee, Rep. John Larson , has introduced such legislation*and Congress should fix this situation as soon as possible.

      Recommended Reading: How Many Years Is Social Security Based On

      Build Income Streams To Retire Securely

      However, it’s essential to take your financial future into your own hands. Whether you are young, nearing retirement, or already a retiree, most people can take some action to begin building income streams to reduce their dependence on Social Security.

      If you are already drawing Social Security, you can still generate an income and receive all of your benefits if you are full retirement age. If you are younger, you can draw Social Security, but your earnings may impact your payments if they’re above a certain level:

      If you are too young for Social Security, you still have time to maximize your earnings and continue saving for retirement. There are several tools available to help you build wealth, including

      You can build wealth by investing in exchange-traded funds , designed to mimic the S& P 500 , which historically averages about 10% returns per year. Some examples include funds like the Vanguard S& P 500 ETF or Vanguard Total Stock Market ETF.

      If you invest in dividend stocks or funds that pay dividends, you can live off of the dividend income they create without ever having to sell your shares. Some companies raise their dividend every year, and those that do so for 25 years or more are called Dividend Aristocrats. The Vanguard Dividend Appreciation ETF offers a dividend yield of 1.5%, while the iShares Core High Dividend ETF yields 3.5%.

      No : Delay Your Divorce

      This won’t work for everyone, but if you have been married for less than a decade and are planning to divorce, and if you are able to delay that divorce, doing so may serve you well. Divorcees may be able to claim benefits based on their ex-spouse’s earnings even if that ex has remarried if they were married for at least 10 years. If your future ex-spouse has a significantly stronger earnings record than you do, you may be able to collect a much bigger monthly benefit check based on his or her earnings than the one based on your own record. There are a few more rules related to this, so look into them if this might apply to you.

      Read Also: Full Social Security Benefit Amount

      Consider Tax Benefits And Where You Retire

      Retirees should also pay close attention to tax benefits and where they retire.

      One little-known fact about Social Security is that your benefits may indeed be subject to federal taxation, as well as state taxation. Individuals earning more than $25,000 annually, and couples filing jointly with more than $32,000 in income, can have at least half of their Social Security income exposed to federal taxation. The use of a Roth IRA, which grows tax-free for life and won’t count toward your annual adjusted gross income regardless how much you withdraw, can be useful in keeping your income below these federal tax thresholds in retirement.

      However, 13 states also tax Social Security benefits. Should you choose to live in a state that taxes Social Security benefits, you may be required to hand over some of your benefit. If you want to keep as much of your Social Security income as possible, you’ll want to pay close attention to where you retire.

      Can You Get This Bonus If You Have Already Started Collecting Social Security

      Americansâ Social Security Benefits to Increase 1.7% in ...

      There is a rule that says you can change your mind about receiving your benefits. You must do this within 12 months after you first file. You must also pay back all the benefits you received. You can do this once. The Social Security administration explains how that works on this page.

      So lets say you filed for Social Security early, at age 62 or maybe a little later. And now youre hearing about this mysterious $16,727 Social Security Bonus report. Is it too late for you to take advantage of that? Not if you are still within that first 12-month period. But if you cannot afford to repay your benefits and live on other income until you file at age 70, then there isnt anything you can do. If you need Social Security benefits now, take them.

      The Motley Fools $16,728 Social Security Bonus Report Is All But a Scam

      Its not entirely a scam because youre not paying them any money. But they do make you go through a couple of signups and endure their nagging emails if you dont complete the process. Theyll send you the silly report.

      Even so, I dont like the fact that the Motley Fool has been advertising this $16,728 Social Security Bonus for years without providing any substantial information that helps people. By that, I mean they are not revealing some deeply buried secret only a few people have access to. This is not inside information by any stretch of the imagination.

      Recommended Reading: When To Take Social Security Early

      Ways To Increase Your Social Security Check After You Retire

      If you work for just 10 years and pay Social Security taxes, youre entitled to a Social Security check when you retire. Of course, youll need far more than that if you want to be anywhere near the maximum of $3,800 a month if you retire at 70, but youll be able to collect something even with only 10 years.

      However, if youre one of the 50% to 70% of Americans who count on Social Security for at least half of your income in retirement, something isnt particularly encouraging. You want to know how much youll getand how to increase that amount as much as possible. After all, the average retiree collects about $1,450 a month from Social Security in 2019, not exactly a living wage.

      The good news is unless retirement is justaround the corner, you can increaseyour Social Security check. Heres what you need to know to get every dollaryoure entitled to when youre ready to quit your job for good.

      What Actions Do You Need To Take

      People already getting Social Security do not need to do anything to get the increase checks will be automatically adjusted.

      Before that happens, however, recipients may want to look at their monthly budgets and see if they can put the extra money to use.

      “They really need to look at the numbers and what that increase means to them, what it will mean for their monthly check,” said certified financial planner Diahann Lassus, managing principal at Peapack Private Wealth Management, based in New Providence, New Jersey. Having the extra money each month may help some people pay down debt or put some of it into an emergency savings fund, she said.

      “It’s kind of like when you’re working and getting a salary increase are their other things you can do for you?” said Lassus.

      Recommended Reading: Look Up Child’s Social Security Number

      Work For Longer Than 35 Years

      The second factor that the SSA considers when calculating your Social Security benefit is your length of work history. The SSA averages your 35 highest-earning years when calculating your monthly payout, which on the surface means you should work at least 35 years if you don’t want $0’s averaged in for each year less of 35 that you worked.

      But it’s generally not a bad idea to consider working well beyond 35 years. Chances are you lacked the skill set necessary to garner a high wage in your teens or early 20s. By your 60s you’ll likely have plenty of work experience, which could translate to a higher annual wage even after adjusting for inflation and lift your overall earning average over your 35 highest-earning years.

      No : Delay Starting To Collect Your Benefits

      Economist: Social Security increase offsets cost of living

      Another way to increase your Social Security benefits is to delay starting to collect them. You can start as early as age 62 and delay up to age 70. Each of us has a “full” retirement age , and for every year beyond that that you delay, your benefits will grow by about 8%. Delay from age 67 to 70 and you’ll get benefits 24% bigger. The table below shows the effect of starting to collect early or late. For example, if your full retirement age is 67 and you start collecting benefits at 64, your checks will be 80% of what they would have been had you started collecting at 67.

      Social Security benefits table

      Also Check: How Are Social Security Benefits Calculated

      Don’t Forget About The Effects Of Inflation

      Despite the fact that Medicare premiums are going up, seniors will still see more money from Social Security each month starting in 2022. But, sadly, a bigger check doesn’t necessarily translate to more buying power. That’s because even a large COLA may fall short of keeping up with the actual inflation that’s occurring.

      COLAs are calculated based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers . Many experts believe this price index underestimates how much seniors spend on certain costs such as housing and healthcare. These costs tend to see faster price increases than other goods and services. And evidence suggests that benefits have lost 30% of their buying power since 2000 because of this issue.

      Not only that, but the COLA calculation is just a snapshot in time. The change in prices is measured based on changes in cost that occur in the third quarter of the year during the months of July, August, and September. If continued rapid price increases occur after that time, retirees could be left short. And evidence also suggests inflation has gotten worse since the COLA calculation for 2022.

      So, retirees must remember the slightly bigger amount they’ll see on paper may still leave them worse off in 2022. Seniors should keep careful tabs on their budget to ensure they aren’t spending more than they can afford, even with the theoretical bump up in benefits they’ll see in their first payment in 2022.

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