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5 Social Security Tips To Get Ahead Of The Game

06/11/2015 06:29 pm ET | Updated Jun 11, 2016
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Social Security can be a confusing system to understand. We'll help you make more sense of your options with these five helpful tips.

A lot of people struggle to understand just how their Social Security benefits work, when they should start accepting them and how this affects those who are married, or couples that may still have one spouse in the workforce. Use these five Social Security tips to make more sense of your options.

Timing Matters

When you decide to start your Social Security benefits is important. But experts like Charles Schwab warn that if you are not careful of when you start your benefits, there could be lasting effects for you, in particular if you are a couple. The basics include that if you start your benefits early, you will be issued a lesser monthly amount, but the longer that you wait, the more that you will get.

Social Security benefits can be collected as early as age 62. But if you start collecting them this early, they can be permanently reduced. However, if you wait to start collecting them until your full retirement age of 66 (for people born from 1943 to 1954), they could be substantially more. Alternatively, if you wait until after your retirement age, your payout will go up by 8% each year until you turn 70.

Wait Until Retirement Age For Greatest Payout

The Social Security Administration says that there is no "right age" to start collecting benefits. But as explained above, waiting until you are of full retirement age gives you the most money. If you take your benefits before retirement age, there's a permanent reduction in payout. By waiting for until retirement age, a couple stands to gain thousands of dollars more in payouts over the course of the payout period, until they pass away.

Delay Benefits If Income Is Strong

The Bank of America says that the average payout on benefits for a married couple of retirement age is a whopping $470,000. Yet, they also say that over 75% of Americans cash in on their benefits too early. If you are in good health and have a strong, steady income or pension, waiting to collect on your benefits is smart financial thinking that has a lucrative long-term payout.

You can also consider letting the lower income spouse start collecting benefits while the higher income earning spouse negates. This can help assure that the surviving spouse gets the greatest amounts of benefits as possible.

The File And Suspend Approach

The Social Security Administration offers some additional advice on the file and suspend option. If both spouses file to receive their benefits when at full retirement age, but then suspend them, one spouse can collect a spouse's benefit as both allow the regular benefits to grow.

File And Restrict

Alternatively, you can look at the file and restrict option. This method lets one spouse collect benefits while the other restricts theirs. This postpones the collection of one spouse's benefits while allowing the other to collect, assuring that one benefit grows while the other is tapped.

You can find more information at the Social Security Administration.

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