Give Yourself a ‘Bonus‘: How to Maximize Your Social Security Payout

In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury in Washington, DC on Oct. 14, 2021. (Kevin Dietsch/Getty Images)

Most Americans are playing catch up when it comes to retirement savings.

Even if you make a sizable income, putting away money for retirement is challenging. There is always some necessity with which you must deal. So, making sure you receive the most retirement income possible from Social Security is essential.

Fortunately, there are some strategies you can use to get the most out of your Social Security benefits.  While the Social Security Administration doesn’t hand out bonuses, some bonus-like increases can happen.

The Social Security Administration uses a formula based on lifelong income to calculate a recipient’s retirement benefit. Then it applies an annual cost-of-living adjustment (COLA). This is intended to offset the effect of inflation and other factors that diminish the buying power of your monthly Social Security check. For 2022, the COLA was 5.9 percent.

Your social security benefits might increase based on the inflation rate. (fizkes/ShutterStock)

You must wait until full retirement age (FRA) before you receive your full benefits. Today, FRA is typically age 66 or 67, depending on your birth year.

But if you retired early and are hoping to make a little extra income, there might be a way to give yourself a bonus.

You can retire at 62 at a reduced benefit, but any additional income you receive beyond Social Security will be restricted until you reach FRA. During this period, you are restricted from earning more than an additional $1,630 per month. If you go above that amount, your Social Security benefits will be reduced.

The average Social Security check at FRA, without additional income, is $1,563 per month. If you retire early, that check will be reduced. The additional earned income restriction can be an extra hardship during this period.

Rep. Bill Posey (R-Fl.) has introduced the Senior Citizens Inflation Relief Act. The bill proposes increasing the extra income that a Social Security recipient may earn per month prior to FRA. The act increases the extra earned income allowed to $2,046.67 per month. That’s roughly an additional $484 per month.

Posey proposed the act to help senior citizens combat inflation. It would help Social Security recipients reduce their need to incur debt and give them bonus-like income.

If you retired early and are hoping to make a little extra income, there might be a way to give yourself a bonus. (WHYFRAME/ShutterStock)

If you elect to receive benefits before FRA, there is another way to receive a pseudo bonus. This takes advantage of what are known as “special payments” after retirement (.pdf).

Essentially, there are circumstances when you perform work before you retire, but receive pay for it after retiring. Most of the time, regardless of age, these payments will not affect your Social Security payments. Special payments might include vacation pay, sick pay, severance pay, back pay, bonuses, and sales commissions.

Salespeople and insurance agents may be affected by the special payments rule. These earners often receive commissions for sales they made before retirement. They are not penalized for these special payments.

Farmers may also receive deferred payments. Often farmers grow crops one year and sell them in another year. If a farmer sells these crops after retiring, the income earned is considered a special payment and Social Security payments are not penalized.

A self-employed individual can also take advantage of special payments. If you were self-employed, any net income received after the first year you retire is a special payment. But this income must have been earned for “services” of regular work and performed before you were eligible for Social Security.

Income from a crop that is harvested and stored fully before retirement will not affect Social Security payments. (NOVA SAFO/AFP/Getty Images)

Another way to maximize Social Security benefits is to take advantage of the rules for married couples. A spouse can make a Social Security claim based on their own work history or up to 50 percent of their living spouse’s. If the lower earning spouse waits until FRA, they can claim the full 50 percent. And if you are divorced but were married for at least ten years, a claim may be made on your ex-spouse’s Social Security benefits.

Surviving spouses might be able to boost their Social Security benefits if the deceased spouse had a larger benefit. For instance, if the deceased spouse had a $3,000 monthly benefit and the surviving spouse had $2,000 per month, the new benefit for the surviving spouse would be $3,000.

Being proactive with your Social Security retirement benefits is essential. Make it a point to compare the income on your W-2 form with what the Social Security Administration lists as your income. Mistakes are sometimes made. You will want to ensure that your work record is correct, as your work earnings history is used to calculate your Social Security retirement benefit.

If you are healthy and want to enhance your benefits, wait until you are 70 to start collecting Social Security. This will give you a chance to maximize your work life. For every year you wait to retire, your monthly benefit will grow roughly eight percent. By postponing full retirement, you will collect the full benefit. The maximum Social Security benefit you can receive is $3,895 per month.

Married couples can maximize their Social Security retirement benefits by being proactive. (Dragana Gordic/Shutterstock)

Social Security doesn’t give bonuses outright. However, by being proactive there are ways to increase your monthly payout. In addition, you can work to earn extra income, although how much additional income you can make before FRA will depend on the proposed Senior Citizens Inflation Relief Act. And, once you reach FRA, there is no limit to the extra income you can generate without hurting your Social Security payment.

The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.