Little-Known Strategies to Maximize Your Social Security Benefits

More than 50 million Americans receive monthly Social Security benefits. For more than 20% of married couples and 40% of singles, Social Security is their sole source of income in retirement.

Maybe that’s why the government’s recent announcement that there will be no cost of living increase (COLA) for Social Security recipients next year -- the first year without a raise since automatic adjustments were adopted in 1975 -- hit so many seniors so hard.

Even if Social Security is only one piece of your overall retirement nest egg, it's important that you make the most of it. Personal finance experts Ken and Daria Dolan of Dolans.com are going to show you some little-known strategies that can help you maximize your Social Security benefits (the last one is a real doozy!).

Ignore the No. 1 Social Security Myth

Time and time again we hear people say that their Social Security benefit is based on your last five years of earnings. WRONG! This is one of those nasty rumors that just won't die and it's flat out not true.

The Social Security Administration (SSA) uses your highest 35 years of earnings to calculate your benefits! So, for the sake of example, if you have worked for 39 years, the SSA will throw out your 4 lowest earning years.

Check Your PEBES

Every year, you should receive a copy of your Personal Earnings and Benefit Estimate Statement (PEBES) from the Social Security Administration. This statement lists the number of years that you have been credited for working and the amount of income reported.

These two critical pieces of information are used to calculate your future SS benefits so it's important that you be sure they are reported correctly.

Your PEBEs statement is also helpful in your retirement planning since it gives you a projection of future Social Security benefits.

If you haven’t received one, here's how to order your PEBES statement and check it for errors.

Know Your Real Retirement Age

There's a huge financial plus to delaying your Social Security benefits. But your strategy depends highly on your age since the "normal" retirement age ranges from 65 to 67 depending on when you were born.

Although you may start taking Social Security benefits as early as age 62, you would then only receive 75% of your full benefit. By waiting to age 70, you’ll get 132% more in benefits!

Many people still mistakenly think that 65 is the official retirement age, but that's not true.

Use this handy Social Security retirement age chart to find the full age at which you can start taking full Social Security benefits.

Tap into Your Ex's Benefits

We're about to share several little known strategies to make the most of your Social Security benefits if you are married. But before we get to those, let's talk about a special strategy if you are divorced.

Not many people realize this, but you can collect benefits based on your ex-spouse's earnings. The spousal benefit is the same as if you were married -- 50% of your ex-spouse's benefits at age 65. There are, of course, some rules:

· You must have been married for at least ten years
· You cannot be married to someone else
· The benefit you receive based on your ex-spouse's work record must be larger than the benefit that you would receive based on your own work history; and
· If your ex-spouse has not yet signed up for Social Security, you must have been divorced for at least two years before your make your claim.

If your own earnings were sporadic or low, this strategy could pay you a larger benefit than your own work history. You can start collecting this benefit as early as age 62, even before you ex-spouse retires. Your claim will not affect the size of your ex's Social Security payments -- in fact, your ex doesn’t even have to know you're collecting these benefits!

Maximize Your Spousal Benefit When One Spouse Didn’t Work

Here's a strategy if you or your spouse didn't work, or does not have enough credits to claim Social Security benefits based on your own earnings record.

You can maximize your benefits using what’s called a "claim and suspend" strategy. Here's how it works: once the higher earner reaches full retirement age, he claims and immediately suspends his retirement benefits. By doing this, the spouse receives a spousal benefit based on the working spouse's earning record.

Remember, if the higher earning spouse (often the husband) dies first, the lower earning spouse can then switch to the survivor's benefit which is 100% of the benefit received by their spouse.

Maximize Your Benefits When Both Spouses Are Eligible for S.S.

If you and your spouse are each eligible for benefits based on your individual earnings, you can actually claim Social Security twice. Really. Here are the caveats: You must both have significant earnings, and at least one of you must delay claiming your Social Security benefits until age 66. When you wait until your full retirement age to start your benefits, you can choose whether to receive benefits based on your earnings record or that of your spouse. You can even receive both at different times.

For example, if a husband claims his benefits at age 70, his 66-year old wife (who is at her full retirement age) can file for a spousal benefit based on his working record equal. You get to collect 50% of his benefit.

The wife continues working and contributing to Social Security for four more years until she is 70. Then she stops receiving the spousal benefit and starts receiving Social Security benefits based on her own working record.

She gets to start collecting the spousal benefit PLUS she boosts her Social Security checks because she delayed her claim PLUS she potentially increased her payment because she added higher earning years to overall work record.

Ask for a "Do Over"

Now for a strategy that only a fraction of a fraction of Social Security beneficiaries have ever heard of!

We already told you that it's smart for many people to wait until their full retirement age to start taking Social Security benefits. But what if you didn't? What if you start your benefits and change your mind?

Well, most retirement decisions are hard to reverse, but this is one time you get a "do over."

Here how it works: The Social Security Administration allows seniors who have started taking their monthly benefit to stop their benefits and start again later.

You simply repay the full amount in benefits received to date with NO interest, then you "re-start" your benefit at a later date (and probably a higher amount) as though you had deferred taking their benefits in the first place! For example … if you began receiving benefits at age 62, but then changed your mind and wanted to wait until age 70 to begin collecting benefits.

Using this strategy, you could increase your Social Security payments by more than 70%!

Knowing how to maximize your Social Security benefits can make a big difference in your retirement income.