Photo credit: finance.yahoo.com
The Truth Behind the Social Security “Bonus”
Recently, a topic of substantial interest has surfaced regarding a supposed yearly bonus from Social Security, with figures circulating around $16,728. This has led many to speculate on its validity, especially for 2024.
Consider This: 8 Common Mistakes Retirees Make With Their Social Security Checks
Find Out: 6 SUVs That Last Longer Than You Think and Are Worth the Money
It’s important to clarify that there is no actual “bonus” for retirees receiving Social Security. The discussions surrounding this so-called bonus are misconceptions that point toward strategies for enhancing monthly benefits rather than an actual payout.
The Social Security Administration (SSA) determines benefit amounts through a calculated formula based on an individual’s earnings throughout their lifetime. While there is no traditional bonus, there are methods to potentially increase the monthly benefits, leading to significant additional annual income.
According to the SSA, benefits are based on the highest 35 years of earnings. If an individual has worked years with little to no income, those periods adversely affect the benefit calculation.
To boost the potential benefits, working additional years can help replace a zero or low-earning year in the calculation, consequently increasing the final benefit amount. However, it’s critical to note that there is a cap on earnings considered for this calculation. For 2025, the Social Security wage base will be set at $176,100, marking the upper threshold for earnings that are taxed for Social Security purposes.
Trending Now: Cutting Expenses in Retirement: 6 Stores To Stop Buying From
One effective strategy for maximizing benefits is to delay Social Security claims until reaching the age of 70, which significantly increases the benefit amount. Data indicates that only about 10% of workers choose this option. This delay can have profound financial repercussions—research from the National Bureau of Economic Research identified a median loss of approximately $182,370 in household discretionary spending for those who opt for benefits before age 70.
To emphasize the financial implications, benefits claimed at age 70 can be up to 76% higher than those taken at 62, even when adjusted for inflation.
Furthermore, married couples should employ thoughtful strategies regarding claiming spousal benefits. Unlike individual benefits, spousal benefits do not increase if payments are delayed past the full retirement age (FRA), which usually falls between ages 66 and 67, depending on the year of birth. The spousal benefit can either be based on the individual’s work record or be up to half of the higher-income spouse’s benefit, whichever amount is larger.
Overall, while the allure of a Social Security bonus may be persuasive, understanding the strategies available for maximizing benefits is essential for retirees seeking to enhance their financial stability in later years.
Source
finance.yahoo.com