3 Ways to Increase Your Social Security Paycheck

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Want to increase your retirement income? Here are a few methods for obtaining it.

Did you know that as a senior, you can actually increase your Social Security benefit? Your benefit amount is not fixed, and the choices you make now could have a significant impact on your retirement benefits.

Therefore, how can you ensure that you receive the maximum possible Social Security benefit? Consider the following three steps to increase your payments and alleviate financial concerns in your later years.

 

SOCIAL SECURITY

 

1. Save for retirement by investing in Roth IRAs.

At first glance, the type of retirement account you use may appear to have nothing to do with your Social Security benefits. However, if you choose a Roth 401(k) or IRA over a traditional account, you may be able to retain a greater portion of your retirement income.

As you can see, once your provisional income reaches a certain level, your Social Security benefits become taxable. This threshold is not inflation-indexed and is quite low, at $25,000 for single filers and $32,000 for married joint filers. Each year, an increasing number of retirees reach it. Therefore, if you retire in the future, there is a good chance you will be above the threshold and thus forfeit some of your benefits to the IRS.

However, provisional income is calculated differently than regular income. It is equal to half of your Social Security benefits, a portion of your non-taxable income, and your entire taxable income. It excludes distributions from Roth accounts, which are not taxable.

This means that if you invest in a Roth IRA, you should avoid paying taxes on retirement benefits even if you withdraw a sizable sum. You’ll receive a larger Social Security check because the IRS will not deduct a portion of it.

 

2. Make a deliberate choice about the state in which you wish to retire.

The IRS may not be the only party interested in your Social Security benefits. If you live in one of the 12 states that tax benefits, you may also see a reduction in your retirement income as a result of your local government claiming a portion of it.

Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia are the 12 states where this could be an issue.

If your goal is to receive the largest possible Social Security benefit and you don’t want to worry about your take-home pay declining due to state taxes, avoid these locations when deciding where to retire.

3. Delay filing for benefits as long as possible

Social Security benefits can be claimed beginning at the age of 62. However, it is common – and frequently prudent – to delay receiving benefits. Indeed, you may be eligible to receive your first check as late as age 70. The primary benefit of delaying a claim is a higher monthly payment.

Your benefits are subject to a system of early filing penalties and delayed retirement credits. The purpose of this system is to level the playing field between those who claim early and those who claim late. Early filers receive a greater number of checks, but each check is smaller. In the case of late filers, who receive fewer checks but receive larger payments, the reverse is true.

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If you want the highest monthly income possible, you must wait until age 70 to avoid all possible early filing penalties and to maximize any credits due as a result of waiting. Of course, this means you risk receiving less lifetime income if you die before receiving sufficient large checks to make up for lost benefits. However, this risk may be worthwhile if you require the largest possible Social Security check to retire comfortably.

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