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Social Security Benefits: How to Maximize a Crucial Part of Your Retirement Finances

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Social Security provides income to you and your dependents in a way that virtually no other financial account can.

  • You can't outlive it;
  • It provides automatic cost of living adjustments; and
  • You don't have to be an investment expert to use it.

Social Security can address a significant fear for most everyone — outliving your income. And, unlike many retirement plans that pay out a fixed, level benefit, Social Security adjusts as the cost of living goes up — which means payouts typically increase each year. Finally, you don't have to be a financial expert to receive a Social Security benefit — the ups and downs of financial markets or reinvestment and sequence of return risks don't apply.

Qualifying for Social Security

To receive Social Security benefits, you need to have 40 credits (formerly known as 'quarters of coverage.') The most credits you can earn in a calendar year is four — and you qualify for four credits as rapidly as you earn them.

  • Your retirement benefits are available to you as early as age 62. Your spouse can also receive benefits based on your work history as early as when they turn 62. This is known as a spousal benefit.
  • If you die, your surviving spouse can receive survivor benefits as early as age 60. This is known as a widow/widower's benefit.
  • All benefits are based on Full Retirement Age (FRA). For those born between 1943 and 1954, FRA is 66 years and 0 months. If you decide to receive benefits at any other time (either before or after FRA), your benefit may decrease or increase. Bottom line is that filing for benefits later means a larger benefit.

When Should I Claim My Social Security Benefits?

Generally, there are no simple answers. There are a lot of different factors and circumstances that can affect your decision, and what works for one person will not be the same for another. Social Security is specifically tailored to you and your family based on your work history and situation. Ultimately, it's important to learn as much as possible about claiming strategies, their benefits and any expected consequences if you want to maximize your own Social Security benefit.

Will Social Security Be Enough?

Although Social Security provides an income stream that you can't outlive, will it provide enough income? Maybe not. Having other income sources may not only be smart, but it may be necessary! Pensions, savings, retirement plans and work will likely be needed to supplement Social Security income.

A smart step may be to consider ways to close the gap. Consider IRAs and non-qualified annuities — both deferred and immediate — for lifetime needs, and life insurance for your surviving spouse and/or dependents.

For further insight on Social Security, talk to a financial professional or your local Social Security Administration office, or visit the Social Security website at www.ssa.gov. With a thoughtful and comprehensive retirement plan, you can feel confident about the steps you need to take to design your retirement to be both financially secure and personally rewarding.

Explore Additional Resources

Find the Claiming Strategy That Works Best for You

Watch this video to help better understand claiming strategies to help maximize your Social Security.

PLAY VIDEO

 What to Know at Every Retirement Age Milestone

Learn more about the important milestones as you begin thinking about retirement. 

Download Guide

How You Can Become Eligible to Receive a Social Security Retirement Benefit

In this video, we’ll explore how you can become eligible for a Social Security retirement benefit. 

PLAY VIDEO

Find the Claiming Strategy That Works Best for You

Hello, I’m Morgan Scott, Vice President of Advanced Markets for Columbus Life Insurance Company.
 
Over the next minute or so, we will explore one of the most important Social Security decisions a worker will make: when to claim their retirement benefits.

Generally speaking, you can claim your Social Security retirement benefit between the ages of 62 and 70. The earlier you take your benefit, the lower it will be. The longer you wait to claim your benefit, the higher it will be. The decision is important because — with limited exceptions — once the benefit begins, it cannot be changed.

A worker’s Social Security retirement benefit is based on what they would receive at Full Retirement Age, or FRA. While one’s FRA is controlled by what year you were born in, for the purpose of this video, let’s assume that your FRA is 66, and the monthly benefit is $1,000. 

Claiming early will allow your benefit to begin earlier, but will result in a reduced benefit amount. As an example: if you were to claim your Social Security as soon as possible — age 62 — you would see a 25% reduction in your benefit and receive $750 a month. 

On the other hand, if you delay claiming your benefit, it will grow by 8% simple interest each year up to age 70. Based on our example, if you claimed at age 70, you would receive 132% of your benefit, or $1,320 a month. 

Because there is no “one size fits all” approach to when to claim your benefits, it is important to consider these rules in light of your own personal circumstances. Please consult your legal or financial advisor or the Social Security Administration.

For additional information, please go to www.ssa.gov.

How You Can Become Eligible to Receive a Social Security Retirement Benefit

Hello, I’m Morgan Scott, Vice President of Advanced Markets for Columbus Life Insurance Company.
 
Over the next minute or so, we will explore how you become eligible to receive a Social Security retirement benefit.

To receive a Social Security benefit, a worker must have accumulated enough “credits” to be entitled to a benefit. Qualification for Social Security used to be based on “quarters of coverage,” but these are now known as “credits.” A credit is earned for every quarter in which earned income exceeds the applicable requirement and the worker contributes to Social Security. A maximum of 4 credits can be earned in a year. 

Once 40 credits have been earned, the worker has qualified to receive a Social Security benefit – it does not matter when qualification occurred.

Qualifications for other benefits are based on different criteria, and are a topic for another day. 
A worker’s retirement benefit amount is based on the Primary Insurance Amount (PIA), which is the worker’s monthly benefit payable at Full Retirement Age, or FRA. Full Retirement Age changes depending on the worker’s birth year. Full Retirement Age is 66 for those born between 1943 and 1954. For those born between 1955 and 1959, Full Retirement Age increases by two months each year in the range. For those born after 1960, Full Retirement Age is 67.

As we will discuss in other videos in this series, payments that begin either before or after Full Retirement Age decrease or increase respectively. We will discover that a sound claiming strategy will have a profound impact on the lifetime benefit.

The PIA is determined by multiplying each year’s earnings up to the maximum Social Security wage base by an inflation factor, aggregating the 35 highest years and dividing by 420. This gives the average index monthly earnings. Different percentages at different bend points are then applied to this number to give the PIA.

The calculation is complex, but the Social Security Administration has personnel and tools to assist you in the calculation. 

Because of the complexity involved in determining Social Security eligibility, it is important to consider these rules in light of your own personal circumstances. Please consult your legal or financial advisor or the Social Security Administration.

For additional information, please go to www.ssa.gov.

View Our Entire Social Security Video Series

Learn more about Social Security by viewing our entire Social Security video series that includes additional topics about divorce, taxation and more. 

View Our Video Series
IMPORTANT DISCLOSURES
Columbus Life Insurance Company does not provide social security advice. The information provided is for educational purposes only.

The information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) addressed by this material. This material is being provided for informational purposes only. Columbus Life does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Consult an attorney or tax advisor regarding your specific legal or tax situation. There are insurance related costs to a life insurance policy. Premiums paid must produce sufficient cash value to pay insurance charges.

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