For many retirees and pre-retirees, Social Security will play an integral role in ensuring that their month-to-month expenses are taken care of. A recently updated Gallup poll showed that nearly 9 in 10 current retirees count on Social Security income to some degree each month, while around 80% of surveyed pre-retirees expect to do the same in retirement.
However, Social Security's future is still very much up in the air. While the program isn't going bankrupt, demographic shifts, which include the retirement of baby boomers and lengthening life expectancies, could wind up pushing benefits lower across the board. The latest report from the Social Security Board of Trustees has forecast that a 21% drop in benefits would be needed to sustain the program through 2090. Since workers and seniors simply can't count on Congress to get a fix in place, they need to be focused on ways to increase their Social Security benefits come retirement.
The obvious way to boost your Social Security income is to simply wait to file for benefits. Social Security benefits grow by approximately 8% on annually, though your monthly distribution is dependent on your individual full retirement age, or FRA. Your FRA is a dynamic number that's based on your year of birth, and it represents the point at which you become eligible for 100% of your benefits. Retire before your FRA, and your benefit could see a reduction of 25% to 30% from what it would be at your full retirement age. Wait until age 70, the point at which benefits stop accruing, and it could be anywhere from 24% to 32% higher than at your FRA. Waiting as long as possible means a juicier benefit later.
Image source: Getty Images.
Four unconventional ways to boost your Social Security income
But there are other, unconventional ways you can boost your benefit. Here are four such methods.
1. Pull a Social Security mulligan
It's a rule I'd bet most retirees and pre-retirees aren't aware of, but Social Security allows seniors a do-over should they regret taking their benefits early.
Social Security Administration Form 521, officially known as the Request for Withdrawal of Application, allows seniors to withdraw their request for Social Security benefits within the first 12 months following the filing of their application to receive benefits. There are two key catches here. First, Form 521 has to be filed within the first 12 months of claiming benefits -- an important requirement. Second, you'll need to pay back every cent you and your family may have received from the SSA based on your earnings history in order for your withdrawal claim to be undone. If you pay back what you received from the SSA, then it'll be as if you never filed a claim in the first place, and your benefits will continue growing at roughly 8% per year.
A Social Security mulligan is a particularly smart move for seniors who've struggled to get a job in their early to mid-60s, but wound up landing a well-paying job a few months after signing up for Social Security benefits.
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2. Work yourself into a higher benefit check
Seniors may also not be aware that if they file for benefits before reaching their FRA and earn over a certain amount, the SSA can withhold some, or all, of their benefits.
This year, the SSA is allowed to withhold $1 in benefits for each $2 in earned income over $15,720 for individuals receiving benefits who have not reached their FRA. If you'll reach your FRA in 2016 but have not yet done so, the SSA can withhold $1 in benefits for each $3 in earned income over $41,880. Based on a recent press release from the SSA, these thresholds are increasing to $16,920 (or $100 extra a month) and $44,880 ($250 extra a month), respectively, in 2017.
On one hand, these thresholds reduce your expected take-home pay if you're still working and hoping to double-dip with your Social Security benefit. On the other hand, you don't lose this money if it's withheld by the SSA: It's returned to you after you reach your FRA in the form of a higher monthly benefit payment. Thus, you may be able to work between ages 62 and 66, save a few extra dollars, and have your withheld benefits translate into a bigger monthly benefit upon hitting your full retirement age.
Image source: Getty Images.
RELATED: Here are 10 places in America where you can retire with just a Social Security check:
The 10 best places to retire with only a Social Security check
The 10 best places to retire with only a Social Security check
Idaho’s state capital has plenty of affordable housing, costing retirees with a paid-off home a median of just $351 per month. For that low housing cost, retirees have access to a variety of amenities and entertainment. Idaho residents age 60 or older can register for classes at Boise State University for the bargain rate of $5 per credit hour (plus a $20 registration fee per semester). Or you could relax and stroll through a museum or enjoy the outdoor scenery. Seniors also get discounts to the Boise Art Museum, Zoo Boise, Bogus Basin ski area and on some Boise State sporting events. Best of all, a walk or bike ride on the 25-mile greenbelt along the Boise River, which runs through the center of the city, is free for everyone.
Cape Coral, Florida
Waterfront property is a way of life in Cape Coral, which has over 400 miles of canals as well as access to the Gulf of Mexico and the Caloosahatchee River. You could easily spend your days boating, fishing or walking along the beach. But a house on or near the water won’t cost you a fortune. Median homeownership costs for people age 65 and older are $1,251 with a mortgage and $558 without one. The median rent is $983 per month. Many snowbird retirees reside in Cape Coral seasonally due to the pleasant winter weather. An added bonus: There’s no state income tax in Florida.
Colorado Springs, Colorado
The natural wonders will draw you into this Rocky Mountain city. Retirees can linger among the scenic beauty at Pikes Peak, Seven Falls and Garden of the Gods, or find a volunteer position or part-time job sharing these mountain views with tourists. Athletes from across the country come to Colorado Springs to train at the U.S. Olympic Complex, and seniors can visit the facility at a discounted rate. Retirees who have paid off their mortgages get to live in this high-elevation mountain town for the bargain price of $393 per month. Older homeowners with a mortgage ($1,221) and renters ($827) pay more.
When selecting a retirement spot, it’s important to make sure that doctors and hospitals will be there if you need them. Dayton’s largest employers are health care providers, and the city has several hospitals U.S. News has rated as high performing for specific procedures and conditions, including Miami Valley Hospital, Kettering Medical Center and Good Samaritan Hospital. But living near a variety of health care options doesn’t have to cost a lot, ranging from a median of $469 for retirees with a paid off house to $659 for renters and $1,080 monthly for seniors with a mortgage. Aviation buffs and air force retirees will enjoy the National Aviation Hall of Fame and the Dayton Aviation Heritage National Historical Park. The famous Wright brothers were Dayton natives.
Grand Rapids, Michigan
Grand Rapids is known for its impressive arts scene, which includes Frederik Meijer Gardens & Sculpture Park, the Grand Rapids Art Museum and the Urban Institute for Contemporary Arts. The hometown of U.S. President Gerald Ford also has many outdoor recreation opportunities, including the Grand River and nearby Lake Michigan. The area has a booming health care industry, and Spectrum Health is a major employer and service provider. Housing costs are relatively low, with older homeowners paying a median of $1,113 with a mortgage and $434 without one. Retiree renters pay a median of $726 per month to live in the Grand Rapids area. “If you want to have a peaceful, more quiet life and also more reasonable housing, consider the middle west,” says Charles Zhang, a certified financial planner for Zhang Financial in Grand Rapids, Michigan. “The cost of living in the middle west is very reasonable.”
A sports fans paradise, locals can root for the Steelers, Pirates and Penguins. The area is home to several major colleges, including Carnegie Mellon University and the University of Pittsburgh. UPMC Shadyside is ranked the 12th best hospital in the nation by U.S. News. But these big-city amenities are coupled with relatively low housing prices. Costs for older homeowners range from $1,069 with a mortgage to $468 without one. The median rent for retirees is $617 per month. Seniors age 65 or over can also ride the bus, T or Monongahela Incline for free.
(Nivek Neslo via Getty Images)
While northern Virginia has very high housing costs that aren’t likely to be covered by Social Security alone, costs drop significantly a little farther south in Richmond. “We’ve got a lot of folk in Richmond that retire from the D.C. area, and they are able to sell their house in the northern Virginia and D.C. area and maintain a really nice home when they come to Richmond,” says PJ Wallin, a certified financial planner and founder of Atlas Financial in Richmond. “They can buy a really nice home that might be half the cost.” The median retiree homeowner pays $1,282 per month with a mortgage, which drops to $465 among older residents who have paid off their homes. The median rent for senior citizens is $905 monthly. Virginia’s capital city is divided in two by the James River, which has whitewater rapids running through town. The area also has several well-regarded hospitals including the Virginia Commonwealth University Medical Center.
(traveler1116 via Getty Images)
Rochester, New York
While the winters on the southern shore of Lake Ontario can be cold and produce a prolific amount of lake-effect snow, the low housing costs might keep you in town. Older residents pay a median of $1,179 per month with a mortgage and $555 with a paid-off house. Seniors who rent are charged a median of $778 per month. Once the snow thaws, the flowers will bloom again, and Rochester has a large Lilac Festival to celebrate. The city boasts several major colleges, including the University of Rochester and the Rochester Institute of Technology, and the highly rated Strong Memorial Hospital.
(Richard Cummins / robertharding via Getty Images)
History buffs will delight in this old city that was colonized by the Spanish in the early 1700s. The San Antonio Missions were designated a World Heritage site in 2015. San Antonio is located on the southern edge of the scenic terrain and vineyards of Texas hill country. Health care is provided by the high-performing University Hospital. But these amenities don’t cost a fortune in San Antonio. Renters pay a median of $816 per month, while homeowners face costs ranging from a median of $1,146 monthly with a mortgage to $430 per month without one. The state of Texas also doesn’t have an income tax.
Spokane might be best suited to active retirees who love the outdoors. The Spokane River runs through town, and those who walk and bike along it are treated to views of several waterfalls, especially in the spring. Dams along the river are used to generate hydroelectric power. Several nearby ski resorts provide opportunities for winter fun. High-performing hospitals include Providence Sacred Heart Medical Center and Children's Hospital and Deaconess Hospital. Housing costs a median of $1,130 for retirees with a mortgage, but that drops to $425 per month among retirees who have paid off their home. Renters pay a median of $662 monthly.
(Cristie Guevara via Getty Images)
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3. Be mindful of where you retire and how much you make
A third unconventional method to boost your Social Security income is to move to or retire in a state that has a tax-friendly policy toward Social Security benefits and retirement income in general.
Some people may not be aware that the federal government does indeed tax Social Security benefits. If an individual earns more than $25,000 annually, or joint filers more than $32,000 annually, the federal government subjects a percentage of Social Security benefits to ordinary income taxation. Anything below these levels is free of federal taxation. This means a little tax planning, such as leaning on a Roth IRA during retirement, could be worthwhile. A Roth IRA doesn't count toward your adjusted gross income, and eligible withdrawals are tax-free for life.
More importantly, 13 states also tax Social Security benefits. Nine of these states have varying degrees of income exemptions, while four -- Vermont, Minnesota, North Dakota, and West Virginia -- mirror the federal tax schedule for Social Security benefits. If you avoid these states during retirement, you may be able to decrease what you'll hand back in taxes, meaning more money remains in your pocket.
Image source: Flickr user Moodboard.
4. Use your kids to boost family Social Security benefits
A final unconventional way to increase your household's Social Security income is to take advantage of children's benefits for Social Security when available. It's quite uncommon, but in cases in which a parent is old enough to qualify for Social Security (age 62 and up) and certain criteria are met, children can receive up to half of the parent's benefit to avoid reduction in the benefit that the parent receives. In order to qualify, children would need to be:
Under the age of 18
Under the age of 19 and still a full-time student in high school
Or, 18 or older and disabled (with the disability beginning before age 22)
It should be noted that adopted and dependent stepchildren can sometimes qualify. Likewise, children can in some rarer cases qualify for benefits based on the earnings history of a grandparent who is their guardian. The more common situation involving Social Security and children's benefits occurs when a parent dies, with the survivor benefit for children being up to 75% of the parent's Social Security benefit. Nonetheless, if you're of Social Security retirement age and your kids also qualify, you may be able to substantially boost your household income.
The $15,834 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.