A Quick Social Security Review That May Increase Your Retirement Income

Retirement planning can feel complicated, but a few straightforward steps may help you increase your lifetime income.

This short checklist can help you review where you stand and see whether you are missing out on money.

1. Check your earnings history

Begin by reviewing your Social Security record. You can create an account or sign in through the Social Security Administration’s website to view your lifetime earnings and an estimate of your future benefits.

That overview shows what you may collect from Social Security, but it also gives you a chance to spot mistakes in your income record. Fixing errors early could lead to larger benefits later.

2. Think carefully about when to claim benefits

Waiting to file for Social Security can increase your monthly payment. In the example used here, claiming at age 62 could result in a maximum benefit of $2,969 per month, depending on lifetime earnings. If you wait until age 70, that maximum rises to $5,181 per month.

Benefits grow each year you delay, and the increase speeds up to 8% annually once you reach full retirement age, which is 66 or 67 depending on your birth year, until age 70.

Although delaying until 70 can make financial sense, it is not practical for everyone. Some people need the income sooner, and while working longer may be an option for some, not everyone can return to work or keep working.

3. Account for taxes and Medicare

Social Security is taxed less heavily than regular income, but it can still be taxable depending on how much income you have in a given year. Also remember that withdrawals from a traditional retirement account are treated as ordinary income, which can push you into a higher tax bracket than expected.

Depending on your Social Security income, traditional retirement withdrawals, and other income sources, as much as 85% of your benefits may be taxable. That is one reason it can make sense to begin benefits after retirement, when your income is lower than when you are still working.

You also need to include Medicare Part B premiums in your planning. If you are receiving Social Security while enrolled in Medicare, those premiums are automatically deducted from your benefit check. If you delay Social Security, you will be billed directly for Medicare premiums instead, so the cost does not disappear. It is still wise to calculate whether your Social Security income is enough after accounting for Part B premiums, since they reduce the amount you receive.