Although Social Security is supposed to be supplemental income in retirement, it is still an essential income source for most people and a primary income source for some. Nevertheless, many may not realize they can take steps to maximize their benefits either by delaying when they start receiving payment or utilizing spousal strategies.

Retirement income you can count on.

One important thing to remember about your Social Security benefits is they will adjust for inflation, based on changes in the cost of living. In fact, this year’s adjustment of 5.9% was the highest in about forty years and, if inflation persists, it is likely to be even higher next year. The inflation adjustment reached a record high of 14.3% in 1980, when the inflation rate was 13.5%. This crucial benefit suggests delaying retirement to have a higher base for inflation adjustments should be weighed carefully.

How much can I get from Social Security?

Your Social Security benefit directly correlates with your contributions and is based on your income from your highest 35 years of earning (and of paying FICA taxes). If you do not have 35 years of employment, a zero amount is entered for each of the non-paying years.

It is unlikely any of us remember exactly how much we earned every year, but the government keeps those records for you to access. To help prevent fraud, you will have to answer some tough questions to verify your identity. Some security questions may be obscure. For example, they might ask what your last car payment was or which streets you lived on years ago.

To check your benefits, go to www.ssa.gov, click on “My Social Security,” and “Create an Account.”

You will see a record of your earnings, and estimates of your Social Security benefits for early retirement, full retirement, and retirement at age 70. You will also find estimates of benefits paid to your spouse and other eligible family members as a result of your retirement, disability, or death.

When should I start Social Security benefits?

You may choose to begin receiving Social Security benefits anytime from age 62 to 70. On average (and in an actuarial sense), you should receive the same total amount no matter when you start drawing benefits. This means early retirement gives people about the same total Social Security benefits over their lifetime as those who retire at the normal age. However, early retirees receive smaller amounts at a time to account for the longer period they will receive them.

For each individual, receiving the most benefits will depend on how long you live. It takes about 12 years of full benefits to recoup the foregone early benefits, so the break-even age is about 78.

If you delay past full benefits, you receive an extra 8% per year for waiting. Should you live past the age when the forgone early benefits are recouped, and end up living much longer, the difference could be substantial. If you decide to delay your retirement, the Social Security Administration strongly urges you to sign up for Medicare at age 65.

Special considerations for married couples

When both spouses have paid Social Security taxes, there are even more choices to consider. Each partner has a basic benefit and a spousal benefit but may only collect the larger of the two.

Spousal benefits are based on the work record of a living spouse or ex-spouse. They are generally 50% of the worker’s benefit. Survivor benefits, based on the work record of a deceased spouse or ex-spouse, are 100% of the deceased worker’s last benefit. There are several other differences to keep in mind too, such as: The earliest age for spousal benefits is 62, and the earliest age for survivor’s benefits is 60. The spousal benefit at 62 is 35% of the worker’s benefit, and the survivor’s benefit taken at age 60 is 71.5% of the worker’s benefit.

Married couples may also want to claim Social Security at different times—one spouse might begin benefits early, while the other waits until age 66 or later to begin. This might fund the extra income needed to retire while delaying the benefit for a larger payment later.

I have transitioned to a work-optional lifestyle, and still want to work some of the time.

You may continue to work and still receive Social Security benefits. However, exceeding certain limits for earned income before you reach normal retirement age will reduce benefits. Your earnings in or after the month you reach your full retirement age will not affect your Social Security benefits.

Only wages or self-employment income are “earned income.” Interest payments, dividends, and capital gains are not counted at all.

What else should I consider?

Tackling cost of living adjustments is important for your retirement investment portfolio and understanding potential costs on the horizon can be helpful. A client advisor at Arvest Wealth Management can help you consider a holistic view of your retirement plans by integrating your benefits with other retirement resources, such as insurance, 401(k)s and IRAs. Let us know if you would like to schedule a meeting.

This information is not written or intended as tax or legal advice, and it may not be relied on for the purpose of determining your Social Security benefits or eligibility, or avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal counsel. The content is derived from sources believed to be accurate.

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Arvest Wealth Management does not offer tax or legal advice – consult a professional.