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To get the most out of Social Security benefits, plan ahead

There's not much you can do to keep the Social Security coffers full. But you can make sure you get the most out of your benefits, and that involves careful consideration and planning.
/ Source: TODAY Contributor

According to a report from researchers at Harvard and Dartmouth Universities, the Social Security Administration has been overestimating revenue and underestimating costs over the last decade and a half -- to the tune of $1 trillion.

That’s cause for concern if you’re one of the many Americans -- 53 percent, according to research from Capital One ShareBuilder’s Financial Freedom Survey -- who are counting on Social Security to help fund your retirement.

There’s not much you can do to keep the Social Security coffers full. But you can make sure you get the most out of your benefits, and that involves careful consideration and planning.

Here are five things you need to know before you cash in:

1. The SSA doesn’t have all the answers. Laurence Kotlikoff, co-author of Get What’s Yours: The Secrets to Maxing Out Your Social Security, says that in his experience, “40 percent of retired people are getting the wrong suggestions, the wrong advice or just partial information.” This extends to your benefits estimate, which is generally low-balled, according to Kotlikoff. It’s fine to head to the SSA for information, but before you do so, you should already have a plan for how you will start your benefits. Software like (created by Kotlikoff) or can help with that.

2. Be aware of all of benefits you’re eligible for. You have your own benefit record, but you may also be able to collect on a spouse’s work record and even that of an ex-spouse. There are also disability benefits and survivor benefits. “You should make your spouse, ex-spouse and children aware of the benefits they can collect on your work record, and make sure you’re aware of what you can collect on your spouse’s and ex-spouse’s record,” says Kotlikoff.

3. Understand that you need to be strategic. Your benefit increases by about 8 percent for every year you wait to take it beyond full retirement age, up to age 70. That can drastically increase your benefit, and you have to time your collection if you want to maximize Social Security, says Kotlikoff. “If you’re eligible to collect more than one benefit, you may want to take one early and let the other one grow.” For married couples, that often means taking the lower-earner’s benefit first and waiting to take the higher-earner’s benefit until he or she reaches age 70. If you’re single, you’ll want to wait until age 70 if you can.

4. Don’t count on dying on time. It sounds harsh, but it’s the reality, says Kotlikoff. “Social Security’s biggest value is insuring against the worst case scenario, which isn’t dying early, but living late. The biggest risk is living because you have to pay for yourself.” To make sure you have enough money to last, you need to take an inventory of all of your income sources as well as your expenses. There are retirement calculators out there to help -- I like this one from T. Rowe Price.

5. Continuing to work can impact your benefits. Again, this is all about timing: If you work and take benefits before full retirement age, your benefit may be reduced. If you take benefits in 2015 and you’re younger than full retirement age, the SSA will deduct $1 from every $2 you earn over $15,720. Once you reach full retirement age, you will get this money back as an increased monthly benefit. Only work wages count; income from investments, pensions and other sources does not.