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How to Get the Most Out of Social Security

Retirees and other Americans who get Social Security benefits will receive a cost-of-living adjustment of 2.8% in 2019. That's a $40-per-month increase on average and it's the biggest adjustment to Social Security payments in the past seven years. 

Your Social Security benefit at full retirement age is based on your highest 35 years of earnings. But what if there is a year during that time with low or zero income in those top 35 years? Then what?

By extending your working years — even by an extra year in your late career, you could increase your payout by raising the amount in those top 35 years. Delaying your Social Security benefits could result in a bigger payout.

If late-career earnings replace a zero in the calculation of your benefits, you could see an increase in the benefit you're entitled to at full retirement age.

For 46% of women and 15% of men, working until age 63 instead of 62 replaced a zero-income year in that calculation, according to a new working paper from the Center for Retirement Research at Boston College. 

"We were really surprised at how many people have zeroes in their top 35 years of earnings, especially women," said study author Matt Rutledge, a research economist at the center.

The big benefit of delaying is in the actuarial adjustment of when you claim Social Security in relation to your full retirement age. Claiming before your full retirement age permanently reduces your benefits; each year you delay from full retirement age until you turn 70 boosts the total by 8%. 

Someone who retires and begins claiming Social Security at age 70, would receive a benefit that's 76% higher than the one he or she would receive at age 62, according to the study. Factor in late-career earnings replacing a zero-income year, and the increase becomes as much as 88% for women and 82% for men. 

Women stand to benefit most from working longer because they tend to have more zeroes in their earnings record. Women work an average of 29 years to men's 38, and they spend an average of 5.5 years out of the workforce caring for children, and 1.2 years out as a caregiver for an older adult.

Get a copy of your earnings record from Social Security to see how much impact late-career earnings would have on your benefit.

Keep in mind that you might also have access to benefits based on the record of a spouse or ex-spouse. That benefit could already be larger than what you'd be entitled to with a few more work years under your belt.





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To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.


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