3 Ways High-Income Earning Individuals Can Maximize Their Social Security Benefit

By: Heather MajkaCertified Social Security Claiming Strategist

If your income falls within a 28% tax bracket (or higher), this one is for you. You have planned, studied, executed and succeeded, which is why you are in this tax bracket. You are well-informed and wise with your money. High-income earning individuals and their spouses should not treat Social Security planning and claiming any differently.

Understanding the nuances that apply to you can help save on your tax obligation and/or maximize your benefit. As you plan for retirement, take the following tips into consideration and use them to build your contingency plan.

3 Social Security Claiming Tips: 

  1. You and your spouse should wait to start drawing Social Security until your full retirement age (FRA), which is likely 66 or 67 depending on the year you were born. You could be taxed so heavily on your Social Security that it could equate to a one-third reduction in your monthly benefit after taxes are applied. Better yet, wait until age 70 to file and use the time to manage the size of your taxable deferred savings before required minimum distributions (RMDs) begin. Also, think about managing modified adjusted gross income (MAGI) thresholds to reduce your Medicare premiums. Filing before FRA could cost you up to a million dollars of forfeited benefit over your lifetime if you live to age 79 or longer.
  1. Maximize any possible spousal benefits. If you were born on or before January 1, 1954, utilize the opportunity to file a restricted application only for a spousal benefit once reaching FRA. This option is still available for those that meet this requirement even after the law changed in 2015.
  1. Work a minimum of 35 years and diligently check your earnings statement. If you see any incorrect numbers on your earnings statement (this really does happen), notify the Social Security Administration. If you have zeros, keep earning!

Those who are self-employed are subject to additional scrutiny. Self-employment taxes may likely outweigh any additional wages added to a lower earning spouse’s record or monthly benefit boost by adding your spouse to the payroll.

Don’t think of Social Security as just a direct deposit once a month; it’s an inflation-protected component of your overall retirement income. Consequently, you should not determine your strategy for Social Security benefits in isolation—instead, you should strive to maximize your total retirement income.

Delaying your benefits will boost your monthly payments and potentially your total income stream later on. Generalizations do not always apply to everyone, and planning is highly individualistic. To get help with your unique situation, it is important to have us evaluate and customize a plan just for you, so give us a call at 865-777-0153.

If you’d like to learn more, register for our free upcoming complimentary dinner and Social Security workshop on June 27th from 5 – 7 pm at Oakwood Senior Living. To register, visit http://bit.ly/2ofAbMH.

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