Optimizing Your Social Security retirement benefits

What does it mean? 

Getting a good return on your investment 

Optimizing your Social Security retirement benefits means getting the best return possible on every dollar you invest in the system. Each pay period, you pay 6.2 percent of your salary in taxes that finance your future benefits (retirement, disability and survivor benefits), and the other Americans. In addition, your employer pays an equal share of taxes if you are self employed, you contribute both your share and the employer part by paying a separate tax. 

Most Americans should plan a benefit strategy

Approximately 96 out of 100 jobs are covered by or eligible for coverage under Social Security. This means that most Americans will use their benefit coverage at some point in their lives. Amount of Social Security benefits you receive will partly be determined by law, inflation and other circumstances beyond your control. But if you make wise decisions about when you retire and how much you earn, you can increase the amount of benefit you will receive. 

Example (s): Mack and Zack are identical twins. Mack early retirement at age sixty-second His monthly payment is $ 800. Zack, on the other hand, waits to retire because he knows that his monthly repayment will be 20 percent higher than Mack if he retires at age 65 (his normal retirement age). Unfortunately, Zack does not believe that even if Macks monthly payment is lower, will Mack receive 36 extra advantage control of early retirement. So unless Zack lives past age 77, will Mack's cumulative lifetime benefit more. 

Will you get out of Social Security what you put in? 

Your return may not equal your investment 

If you have a 401 (k) or another qualified plan, you probably know exactly how much you contribute to it each month. From year to year, see you as your savings grow, first doubling, then tripling. But you know what you contribute to Social Security? Because Social Security taxes are involuntary (as opposed to contributions to a private pension scheme), you probably do not. You may know approximately what distribution you will receive from an IRA, for example, but when you're ready to retire, how much of what you have paid into the social security system, you collect? The answer to this question is difficult because you can never have to use some of the benefits you have earned. Moreover, Social Security, both a pay-as-you-go system of benefits and a social program. What you pay into the system is not exactly what you get out of it. Indeed, because the more money you make, the less return you get on your investment in Social Security benefit formula favors large low income individuals.

How is the average indexed monthly earnings (AIME) benefit formula favors low-income individuals 

If you retire at normal retirement age, your pension benefit would be 100 percent of your primary insurance amount (PIA). Your PIA is calculated using a benefit formula to your Aimé. If you have had low earnings of your life, your benefit will be much lower than the benefit of a person who had high earnings. But because the benefit formula is weighted to favor those with low earnings, you will get back a larger percentage of what you put in, than one who had high earnings. 

Example (s): Willie, Billie and Millie are triplets. They are all performed in a traveling circus and retired on their 65th year after working since age twenty-second To benefit formula hit them: 

Willie, a lion tamer, had high earnings over the years. When he retired, his AIME calculated to $ 2,930. After the benefit formula used were his PIA calculated to $ 1,210.20. Thus, his monthly retirement benefit amount of $ 1,210 for 41 percent of their AIME. 

Billie, a trapeze artist, had average earnings during the year. When she retired, her AIME calculated to $ 1,948. After the benefit formula was used, her PIA was calculated to be $ 938. Her monthly retirement benefit amount of $ 938 is 48 percent of AIME her. 

Millie, a clown, had low earnings during the year. When she retired, her AIME calculated to $ 877. After the benefit formula was used, her PIA was calculated at $ 568.70. Her monthly retirement benefit amount of $ 568 is 65 percent of her AIME. 

A rule that you can not change 

It is clear that individuals with the highest earnings (Willie) receive the highest monthly retirement beneficiaries. But the individual with the lowest earnings (Millie) receive the best return on her investments. Does this mean that you should try to earn less, you will receive a larger percentage of your investment back? No, but it does mean that Social Security is a better investment for a person with lower lifetime earnings than it is for a person who has a higher lifetime earnings. Since Social Security is a mandatory social security system, it is a rule that you can not change. However, you can make some decisions during your lifetime that will affect the amount of your retirement. For more advice to help you, visit http://kenhimmler.com/. 

Decisions affecting the amount of your Social Security retirement benefit when you receive your early retirement 

Choosing when to begin receiving pension benefits is a personal decision, but one who should not be done quickly. Take the time to clip grocery coupons can save you a few dollars, takes a few minutes to determine when you will begin receiving pension benefits can save you thousands. This is due to retire earlier or later than normal retirement age may greatly change the amount of your monthly pension benefit. 

When you retire at normal retirement age, you will receive a retirement benefit equal to 100 percent of your PIA. When you retire early (often at the age of 62, but anytime before normal retirement age), you will receive a reduced benefit. If you retire later than normal retirement age (but before age 70), you will receive an increased benefit. Because you want to receive the highest performance you wish to postpone retirement as long as possible, right? Not necessarily. Even if you get less money per month if you retire early, over your remaining life can you get more than one person, who retired late or at normal retirement age. For example, if you retire at age 62, you will receive 36 more benefit checks than someone who retires at 65 years. This can add up to significant sum of money that will be hard to compensate for even a greater benefit check. On the other hand, you want to work as long as possible because you must make sure your family. In addition, if you delay receiving your Social Security retirement benefit you will increase your benefit greatly because your monthly earnings can rise and you will receive a late retirement credit. 

Tip: When deciding at what age you wish to begin receiving Social Security pensions, consider other retirement benefits, you can receive as well. For example, you may be able to retire at age 62 (or earlier) and begin receiving a pension from your employer, and a Social Security supplement that will pay you a benefit equal to what you would receive from Social Security until you reach normal retirement age. 

How much you earn during your lifetime

Since your retirement benefit check will be based on your average monthly earnings, earn more during your lifetime is one way to maximize your Social Security retirement benefit. The indexed income you receive in a number of your highest earning years (usually 35) are added and divided by the number of months that have passed in these years. The result is your AIME amounts. Thereafter, a benefit formula used to determine your PIA in which your monthly payment will be based. 

You can not increase your monthly payment by changing the formula used to calculate the formula established by law. However, you can increase your monthly payment by increasing your AIME amounts. You may also want to increase your AIME to ensure that you will be entitled to minimum social security benefits in case you have worked only sporadically in a job covered by Social Security. 

How much you earn when you retire

A part of your Social Security retirement benefit is not payable if you are under normal retirement age and who have income in retirement beyond a certain amount. This amount is known as the retirement earnings test exempt amounts. In 2008, you can earn up to $ 13,560 (compared with $ 12,960 in 2007) if you have not yet reached normal retirement age, or up to $ 36,120 (up from $ 34.440 in 2007) during the year you reach normal retirement age ( up to but not including the month you reach normal retirement age). If you do the same as or less than these amounts, your Social Security retirement benefit be reduced. 

When you reach your normal retirement age, your income in retirement, not reduce your Social Security benefit. So to maximize your advantage, you can calculate where your wages can affect your benefit and to consider postponing any earned income in retirement until you reach your normal retirement age. 

Get the information you need to plan your strategy

Before you can plan a strategy to maximize your retirement benefits, you must find out what benefits you are entitled and how much you can receive. The SSA will give you a free evaluation of your future benefits, and a list of what benefits you are entitled to based on your insured status. This Social Security Statement may also be used to check your earnings history.