Retirement Experts: 6 Savvy Money Moves You Didn’t Know You Could Do With Social Security

Social Security cards with cash and benefit amount numbers.
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Social Security benefits can do more than just cover your basic expenses during retirement. For example, by applying a few targeted strategies, you can make this steady source of income work harder for you. According to various financial planners, things like investing, managing taxes and eliminating debt can help maximize what you receive each month. 

If you’re looking to get the most out of your benefits, here are six smart money moves to consider that are expert-approved. 

Blend Social Security Benefits With Other Investments

Oscar Skjaerpe and Shane O’Hara, CFPs at ProVise Management Group in Tampa, Florida, said Social Security income can serve to increase your retirement portfolio. 

If you are receiving Social Security benefits and have excess cash flow, they said, this presents a great opportunity to invest in long-term assets. Investing in stable assets with growth potential can help build wealth over time, using Social Security as a “reliable financial cornerstone,” they said. They recommend that people who implement this strategy take steps to diversify their holdings and also ensure they have emergency funds in place. 

Reduce Your Tax Burden

Jamie Yarbrough, a financial planner with Stonebridge Wealth Management, explained that retirees receiving Social Security benefits often face tax challenges, especially when they have other income sources. However, he said there are several tax-saving strategies that can help reduce the tax burden associated with Social Security benefits. 

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“Understand how Social Security benefits are taxed — up to 85%,” he said. “Delay Social Security benefits to reduce taxes from other tax-advantaged accounts like Roth IRAs or tax-efficient taxable accounts. Strategically withdraw from taxable, tax-deferred accounts and tax-free accounts. Consider partial Roth conversions — this may help spread out taxable income over multiple years and reduce income and reduce required minimum distributions (RMDs) in the future. 

“Retirees can leverage tax-loss harvesting with taxable investment accounts to offset capital gains with capital losses,” Yarbrough added. “Retirees who are charitably inclined can use qualified charitable distributions (QCDs) to reduce taxable income. A QCD allows retirees age 70.5 or older to donate directly from their IRA to a qualified charity, up to $100,000 per year, without having to include the distribution in their taxable income. This can reduce taxable income and potentially keep Social Security benefits from being taxed at higher rates. 

“Lastly, retirees can time capital gains and income, the realization of capital gains and other forms of income to avoid pushing themselves into higher tax brackets.”

Eliminate Debt

O’Hara and Skjaerpe said using your Social Security benefits to eliminate high-interest debt can improve your financial well-being. 

“This approach may free up additional income for savings and investments, potentially leading to increased wealth over time,” they explained. “Since not all debt is created equal, we recommend you work with a financial planner to determine whether it makes financial sense to apply for benefits.”

Work in Retirement

O’Hara and Skjaerpe said most retirees don’t feel the urge to work again, but many decide to return to part-time work for the extra income and social aspect. 

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“There are no income limits if you are at full retirement age (FRA) or older,” they explained. “Earning extra income through part-time work or side projects while receiving Social Security can provide additional funds for investments and savings.”

Grow Wealth Even With Modest Social Security Benefits

Russell E. Gaiser III, MBA, CFP and co-founder at Income Plan HQ in New York, said it’s possible to grow wealth if you have modest Social Security benefits, but it largely depends on your spending goals. 

“Ideally, we need to be able to identify their income requirement from other sources, and ensure they have enough capital (investments, cash, etc.) to deliver that income throughout their life,” he explained. “If they do, they have the ability to segment their wealth and grow their discretionary investments for the future.”

Temporarily Reverse Your Decision To Claim Social Security 

Gaiser said that when people reach age 62 they receive letters from the Social Security Administration inviting them to take their benefits.

“This is simply an invitation, not an obligation,” he said. “It might be enticing, but there are earnings limit tests, spousal benefits, survivor benefits, income planning, etc., to consider.” 

While most people do claim their benefits at age 62, Gaiser said, working with a planner who understands the ins and outs of the system can make all the difference when it comes to claiming or not. 

“If you claimed your benefits and are … worrying about your decision, you do have the option to reverse your filing decision within the first year of taking benefits — but you would owe the money back,” he explained. “You can only do this once.”

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