This Savvy Social Security Strategy Can Save Retirees Money In The Long Run

Getting the most out of your Social Security benefits is all about planning, timing, and strategy. You might consider speaking with a National Social Security Advisor to get your bearings, but ultimately the onus rests with you. You'll need to decide when to start taking benefits (perhaps as early as possible, at 62), and understand how your history of yearly earnings stacks up. Social Security checks aren't designed to completely replace your income, and instead offer about a 40% payout rate compared to your pre-retirement salary.

This means that retirement planning demands a way to account for that other 35-plus percent (experts suggest a retirement income figure at around 75% of pre-retirement earnings). Your own investments can go a long way to achieving this, but some smart planning surrounding your Social Security benefit can also beef up its figure, reducing the burden on your retirement accounts and savings demands. Indeed, a few key features of the Social Security program can be leveraged to help you maximize benefits for you and your spouse over the long term.

Social Security benefits are available to those who've accrued 40 "credits" (you can earn four per year, and one in 2024 requires an earnings figure of $1,730) and hit their 62^nd birthday. Most typical workers in America will become eligible after 10 years of routine work, making it something that nearly all American workers will receive when they reach retirement age. But if you take your benefits at 62 you'll be entitled to a reduced payout figure, 70% of your full benefit amount. Instead, waiting until you reach full retirement age will give you the full benefit, at 67 for those born after 1960.

Just as early draws result in reduced payouts, waiting to start taking benefits later gives you a bonus on top of your full benefit. It you wait until you turn 70, you'll enjoy a 124% payout rate, significantly boosting your check's value. There's a break-even date to consider here. Taking benefits early gives you a higher volume of payments, but at a lower rate. Generally, you'll break even sometime in your late 70s. After this point, the divergence is steep, and the longer you live the more valuable it becomes to have waited to start taking benefits payments.

In practice, it's easy to see why waiting to start your benefits results in better cash flow and more total money paid to you by the Social Security Administration. However, the direct benefit isn't the only thing to consider. If you're married, both you and your spouse will be entitled to Social Security benefits. Although one spouse might be paid a spousal benefit rather than a check off their own Social Security record.

This means more retirement income flowing into your home as you begin taking Social Security checks, but a sharp decline for one partner when their spouse inevitably dies later on in these golden years. You'll become accustomed to a certain level of cash coming into your home, only to have half of it (or more) stripped away when one spouse is no longer entitled to benefits. An important strategy to defend your budget against this downturn is to seek a delay in starting benefits for the higher of the two earners. If the higher earner is able to push their benefit start date out — perhaps all the way to 70 — then the spousal and later survivors benefit that they can provide for their loved one will be notably higher, protecting them for the remainder of their life.