Maximize Social Security Income

Provided to you by:

John C. Gilbert


How to Maximize Your
Social Security Benefits

Written by Financial Educators

Provided to you by

John C. Gilbert

How to Maximize Your Social Security Benefits

All of the information in this booklet is based on the data at the government's social security web site effective for 2022, unless otherwise stated. But rather than repeat the rules, we show you how to USE the rules in plain English to maximize what you have coming to you. Figures change annually, so consult the government's web site for 2023 and later.1 We answer five questions for you:

  1. Can you do anything to potentially increase your social security check before you retire?
  2. At what age is it best to start social security?
  3. How can married couples help maximize the joint benefits?
  4. What methods are available to reduce or avoid tax on your social security benefits?
  5. How can you earn money and still collect social security benefits?

Coming Up on Retirement

You may have a simple question like, "What can I do now to get the biggest check?" The answer is not much but you do have some possibilities if married (explained later). Your social security benefit is based on your 35 highest years of income. So even if you have a couple of "break-the-bank" years of earnings just before you retire, it won't have much impact on your social security check for two reasons:

When Should You Start Your Social Security--Age 62, 65, 70?

This is a really straightforward question and if the math were the only factor, here's the straight-forward answer: wait at least until "full retirement age." Following is the table of full retirement ages and the reductions for starting social security payments early.

Full Retirement and Age 62 Benefit By Year Of Birth
Year of Birth1 Full (normal) Retirement Age Months between age 62 and full retirement age2 At Age 623
A $1000 retirement benefit would be reduced to The retirement benefit is reduced by4 A $500 spouse's benefit would be reduced to The spouse's benefit is reduced by5
1937 or earlier 65 36 $800 20.00% $375 25.00%
1938 65 and 2 months 38 $791 20.83% $370 25.83%
1939 65 and 4 months 40 $783 21.67% $366 26.67%
1940 65 and 6 months 42 $775 22.50% $362 27.50%
1941 65 and 8 months 44 $766 23.33% $358 28.33%
1942 65 and 10 months 46 $758 24.17% $354 29.17%
1943-1954 66 48 $750 25.00% $350 30.00%
1955 66 and 2 months 50 $741 25.83% $345 30.83%
1956 66 and 4 months 52 $733 26.67% $341 31.67%
1957 66 and 6 months 54 $725 27.50% $337 32.50%
1958 66 and 8 months 56 $716 28.33% $333 33.33%
1959 66 and 10 months 58 $708 29.17% $329 34.17%
1960 and later 67 60 $700 30.00% $325 35.00%

1. If you were born on January 1st, you should refer to the previous year. 
2. If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month. If you were born on January 1st, we figure your benefit (and your full retirement age) as if your birthday was in December of the previous year.
3. You must be at least 62 for the entire month to receive benefits.
4. Percentages are approximate due to rounding.
5. The maximum benefit for the spouse is 50 percent of the benefit the worker would receive at full retirement age. The percent reduction for the spouse should be applied after the automatic 50 percent reduction. Percentages are approximate due to rounding.

So let's take this hypothetical example:

You were born in 1952 and turned age 62 in 2014. Your full retirement age is 66. Assume you are projected to receive $1,500 monthly at that time. However, you could start your benefits at age 62 and receive $1,125 (25% reduction). So do you wait and get $1,500 monthly at age 66 or take $1,125 now at age 62?

Some people argue that if they start benefits at age 62, they will get a smaller monthly amount but they could invest it. Hypothetically, if you could invest the funds at 5% guaranteed and that you view yourself as having average life expectancy3, you would still not come out ahead by starting payments at age 62. (This calculation can be done using any financial calculator or spreadsheet with a present value function and the above assumptions.)

Because there is more to life than your life expectancy and discount rate, here are the other factors to consider:

Issue This would argue to...
If you think you can earn more than 6% annually, for sure Take the money now
If people in your family tend to outlive the average life expectancy Take the money later
If you need the money to live on now and have no other sources Take the money now

If you are married and your spouse is also dependent on the payments Takes a lot more figuring - call us on this one
Your tax bracket will be lower later Take the money later
Will you have earned income prior to your full retirement age forcing you to forfeit some of your social security benefit? Take the money later
If you are divorced and your spouse is deceased and you can get benefits based on your ex-spouse's earnings, take it now and let you own benefit grow Take the money later

Once you start to consider several of these factors at once, you may get a headache. Unfortunately, there is no blanket answer as to when to begin social security payments to maximize the benefit. This is an issue a retirement advisor can calculate for you taking into account your entire financial and personal situation.

How Do I Get the Most for My Spouse?

Let's look at an example; Margaret just turned 62 (before 1/1/16) and her husband is 64. Margaret has not worked for the past 10 years and worked 20 of the last 35 years. If she retires now, she's entitled to a monthly payment of $400 (after the 25 percent reduction for starting benefits retirement at the age of 62). When Margaret's husband retires at the age of 66, in two years, his monthly Social Security benefit will be $1,350. Margaret could claim her social security today and receive her $400 per month, based on her own earnings. Then when her husband retires and begins benefits, she could receive a benefit based on his work record. This will come to $472.50, or 35% of her husband's benefit (see prior table). You may have heard that spouses get 50% of the higher-earning spouses benefit-but that's ONLY if they wait until their own full retirement age to start collecting benefits.

Decisions for Spouses

Start my own benefits at age 62 You can take reduced benefits on your wage record before full retirement age. If you do, your benefit will always be reduced--even if you take reduced benefits on your own record and then take spouse's benefits when the higher earning spouse retires. (See previous table showing reduction in spousal benefits).
Start my own benefits at full retirement age If you are the higher earning spouse, you always will quality for benefits under your own earnings record and then the decision is when to start benefits as discussed in the previous section.
Start benefits at age 62 based on my spouse's social security earnings You cannot receive spouse's benefits until your spouse files for and receives retirement benefits. If you choose to receive a reduced benefit before full retirement age, you are not entitled to the full spouse's benefit rate upon reaching full retirement age. A reduced benefit rate is payable for as long as you remain entitled to spouse's benefits.
Start benefits at full retirement age based on my spouse's social security earnings If you stopped working for several years or had low earnings, the spouse's benefit may be higher. At full retirement age, a spouse receives 50 percent of what the higher-earning spouse is entitled to at full retirement age. At death of the higher earning spouse, you receive that deceased spouse's full benefit.

How Do I Reduce/Avoid Income Tax On My Social Security Benefits?

The basic rule is that social security benefits are taxable if your "modified adjusted gross income" (defined as your adjusted gross income from your income tax return plus 50% of social security benefits plus tax-exempt interest plus exclusions per IRS publication 915) exceeds the following limits:

Percent of social security income taxed Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the year Married people
0% Less than $25,000 Less than $34,000
Up to 50% $25,001-$34,000 $34,001 to $44,000
Up to 85% More than $34,000 More than $44,000

Therefore, if you can engineer your includable income below these limits, you may be able to reduce or eliminate taxes on social security income. This may be possible using annuities. While this is not a recommendation to buy annuities, just because they can help reduce the tax on your social security income, the table below illustrates how this is possible in some circumstances.

Using Fixed Annuities to Reduce Tax on Social Security Benefits
Hypothetical Illustration--Not Indicative Of Any Specific Product
  Scenario #1 Interest from CDs Scenario #2 Interest from Tax-Free Bonds Scenario #3 Fixed Annuity Interest (Not Distributed)
Interest $10,000 $10,000 $10,000
Pension $25,000 $25,000 $25,000
Social Security Income $20,000 $20,000 $20,000
Total Income $55,000 $55,000 $45,000
Social Security subject to Tax $6,850 $6,850 $1500
Adjusted Gross Income $41,850 $31,850 $26,500
Total Federal Tax $1,448 $448 $0

Annuities are long-term investments and are guaranteed by the claims-paying ability of the issuer as are tax-free bonds, while CDs are FDIC-insured. Annuities and tax-free bonds cashed in prior to maturity may result in gains or loss and withdrawals from annuities prior to term may incur surrender charges. Withdrawals from CDs prior to term may incur early withdrawal penalties. Purchases or redemptions of tax-free bonds or annuities may incur commissions or charges. Withdrawals from annuities are taxed as ordinary income and withdrawals prior to age 59½ are subject to a 10% penalty. Tax-free bonds used for certain private use purposes may be subject to alternative minimum tax. This comparison does not include State income tax, which might change the results. Federal tax calculation per 2020 rates using the tax calculator at, married filing separately, both taxpayers over age 65 taking standard deduction.

You can see from the above table that if our hypothetical couple, Mr. and Mrs. Smith, move money from CDs to municipal bonds to fixed annuities, the amount of their social security income subject to tax changes, as does their total federal tax. Their lowest tax situation is with the deferred annuity. If they need to withdraw the interest from the annuity, this solution won't help them, as they come out ahead only if they allow the interest to reinvest.

Earn All You Want and Still Collect your Full Social Security

Because of a prior rule, some people still think there are limits on how much you can earn and still collect all of the social security to which you are entitled. That is still true for people who opt to take social security before full retirement age (see above table for full retirement age based on your birth year). However, those working after full retirement age can have unlimited amounts of earned income and still collect their full social security benefit. Here's the rule and then let's look at an example.

Rule: If you are under full retirement age when you start getting your Social Security payments, $1 in benefits will be deducted for each $2 you earn above $19,560 (for 2022)4. In the calendar year you attain full retirement age, $1 in benefits will be deducted for each $3 you earn above $51,960 (for 2022) up to the month of full retirement age attainment.

Hypothetical example:

Mrs. Smith, turned age 62 in March of 2020 decides to retire from employment and start her reduced social security benefits at the rate of $12,000 annually ($1,000 per month). She also decides to start a business. By March 2022, when she is 64, her business is earning a net profit of $24,000 annually. She will need to give up $2,220 ($24,000-$19,560/2) of her annual Social Security for this reason: During those months before you reach full retirement age (age 66 for someone born in 1953 like Mrs. Smith), your social security benefits are reduced $1 for each $2 you earn over $19,560.

Mrs. Smith keeps working at her business and by 2024, the year she reaches full retirement age, her business is earning $55,000 annually ($4583 monthly). For January through November of 2024 (assuming rates don't change), she must give up $84 monthly of Social Security ($1 for every $3 her business earns over $51,960 ($4,330 monthly) in the year she reaches full retirement age, prorated for 11 months. Once December 2024 arrives and she becomes 66 and 8 months (her full retirement age), she can earn unlimited amounts from her business and will never give up any social security income.

For the test above, earnings include bonuses, commissions and vacation pay, but don't include pensions, annuities, investment income, interest, veterans or other government or military retirement benefits.

Best of Both Worlds - File and Suspend

The benefit below is restricted as follows:

1. The lower-earning spouse will have needed to turn age 62 before 2016.

2. The higher-earning spouse will need to file and suspend before April 30, 2016

3. The higher earning spouse must be age 66 before April 30, 2016

If all 3 conditions are not met, then the file and suspend strategy will no longer be available. The new replacement rule after 4/30/16: the lower-earning spouse can only file and receive spousal benefits if the higher-earning spouse is also receiving benefits.

File and Suspend Before 4/30/16

In order for your spouse to get benefits based on your social security account, you are required to file for benefits. However, you may not want benefits now because by waiting, you can collect more later. There may be a way to have your cake and eat it too (if the above three conditions are met by 4/30/16)!

If you have reached full retirement age (see earlier table) then you can file for benefits but tell the Social Security Administration to hold up on the payments. Now that you have filed, your spouse can file for their spousal benefit.

Now, you can earn delayed credits up to age 70 so you can get a larger check later while your spouse enjoys up to half of your benefits today.

John C. Gilbert

John Gilbert has been assisting seniors and helping educators save money for retirement for 20 years. He protects their assets. He has advised retirees of many school districts like HISD, Aldine, and Spring ISD just to name a few with how to create an income stream they cannot outlive and save money for retirement. John is a licensed agent in the state of Texas and an expert in helping retirees preserve their assets and increase their income. Mr. Gilbert graduated from University of St. Thomas in December 1995, with an MBA in Business after some undergraduate work at Prairie View A&M University. To avoid the most frequent ways that many retirees ruin their finances, do not miss the opportunity to schedule an appointment with him.

John Gilbert

John Gilbert, an independent agent with In-Line Insurance and Annuities seeks to preserve clients assets and our style would be properly considered to be "conservative." Most of our clients are looking for strategies to help them plan to save for retirement or age 60+ and retired but looking for a place to park some money that will give them upside potential and downside protection. Our approach have been successful in preserving client account values even during volatile times.

· Wealth Management – preserve your capital -

· Insurance Services – assure that your risks in life are insured for so that an unforeseen event does not destroy your savings and financial plan. -

· Insurance Plans – Whole Life Insurance, Index Universal Life, and Term Insurance -

Phone today with questions or to see if we can help you.
There is no charge for an initial meeting.

John C. Gilbert

(832) 722-4749

John Gilbert
[email protected]
413 West Parker Road Suite A
Houston, TX 77091

©2015 Financial Educators
First Published 07/15/15
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Published by Financial Educators


1 This booklet will be republished each year with the government's figures that apply.
2 Social Security web site 12/21/21
3 Life expectancies as per IRS Publication 590, table 1.