There’s no shortage of life hacks. You can find, for instance, efficient ways to slice frozen butter or clean grout or fix flip-flops. The list goes on and on.
But what about Social Security? Are there ways for you to optimize your lifetime or monthly Social Security benefits? Are there hacks for what represents roughly 33% of a retiree’s total income, and even more for lower-income beneficiaries?
There sure are, say experts.
Social Security calculates what’s called your average indexed monthly earnings for the 35 years in which you earned the most. Social Security applies a formula to those earnings and arrives at your basic benefit, or primary insurance amount (PIA). Your PIA is how much you would receive at your full retirement age — 65 or older, depending on your date of birth.
So, the key to increasing your monthly benefit is to replace the low-income years that are included in the 35-year calculation with higher-income years.
“Social Security rewards higher lifetime average earnings,” says Andy Landis, author of “Social Security: The Inside Story.”
“Increase your earnings per year or increase the years you work,” he says.
Delay, delay, delay
Social Security retirement benefits are increased by a certain percentage (depending on date of birth) if you delay your retirement beyond full retirement age or FRA. The benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits.
“The later you start your Social Security, up to age 70, the more you’ll get per month, says Landis. “And if you live to at least average life expectancy, you’ll get a higher lifetime payout too.”
Social Security refers to this as delayed retirement credits or DRC.
Use an online calculator
Consider using any number of software programs and online calculators to model how best to maximize your Social Security benefit.
“There are so many moving parts in the Social Security filing process that it can be very confusing,” David Freitag, a financial planning consultant and Social Security expert with MassMutual.
“For example, a married couple both turning 62, has 81 different age combinations to consider. Software can show which key variables drive the payout numbers.”
For his part, Joe Elsasser, president of Covisum, which developed a software program called Social Security Timing, recommends making your decision when to claim based on the lifetime value of Social Security benefits, not just the monthly benefit amount.
According to Elsasser, the lifetime benefit considers how much you will receive from Social Security based on when you elect, coupled with how long you will receive benefits based on a reasonable estimate of your longevity, paired with the longevity of other members of the household.
Social Security offers a number of calculators on its website , some of which can help you estimate your lifetime benefits.
Social Security boost:You get only one chance to use this little-known trick
Determine your life expectancy?
Longevity is the true wild card in calculating when to claim Social Security, says Freitag. “Those with a history of longevity in their family, and who have a healthy lifestyle, should consider waiting to file for benefits. Those with a history of low longevity in their family should consider filing early.”
Undo Social Security benefits
Social Security will let you “withdraw” your original application for retirement benefits within the 12 months of the date you first claimed your benefits, according to Landis.
You have to repay all the money you received but then you can restart your Social Security, right then or later, and get more per month. This is great if you come into some money, like a new job, after your Social Security starts.”
You would start the process by completing Social Security form SSA-521.
Note too that if you miss a filing date window, everyone is allowed a six-month look back.
“Using this six-month retroactive look back takes some of the pressure off on making a filing mistake,” says Freitag.
Anyone from FRA to 70 can voluntarily suspend their own Social Security payments for any number of months, up to age 70, says Landis. “When payments restart they’ll be higher,” he says.
One caution: Stopping your own payments could also stop any spousal or child payments on your record.
Restrict your Social Security application
A little-known trick to optimize your Social Security benefits is called restricted application, says Lloyd Sacks, a certified financial planner with Sacks & Associates Wealth Management.
If you or your spouse were born on or before Jan. 1, 1954, you may be able to use this strategy wherein you or your spouse collect a spousal benefit based on the other’s earnings record, thereby delaying the individual benefit and allowing it to continue to grow.
Coordinate your benefits
According to Landis, you might be eligible for two or more kinds of Social Security payments, your own, spousal, survivors, widow’s, or more.
“By properly coordinating and timing your various benefits you can substantially increase your lifetime payout,” he says. “It’s complicated, but online services will guide you.”
Others share this point of view. “When married couples file, they need to look at their combined benefits and make decisions as a couple and not as individuals, says Freitag. “Spousal and survivor benefits can play a big role in the Social Security maximization process. When and how each person files can impact the total payout for both husband and wife. This should be a coordinated decision.”
Experts also recommend not making your decision in a vacuum.
“The impact of one decision on the household can be significant on spousal benefits, dependent benefits, and widow(er) benefits,” Elsasser says.
What’s more, consider other assets such as IRAs and other sources of income, and the tax implications, when deciding when to claim Social Security.
Learn how Social Security works
Knowledge is power and knowledge of your actual Social Security earnings history and benefit estimates are essential to increasing your benefit.
And learn how the Social Security works. “Do some fact-finding, gain an understanding about how the system works, and make your choices that best support your unique situation,” says Freitag.
Robert Powell is the editor of TheStreet’s Retirement Daily www.retirement.thestreet.com and contributes regularly to USA TODAY. Got questions about money? Email Bob at email@example.com