The 2018 Social Security payment schedule is out and you can access the PDF from the SSA’s website. Social Security makes payments to beneficiaries depending on the type of benefit and birth date. For example, if you’re eligible for regular SS benefits and were born on the 5th of the month, you’ll be paid on the second Wednesday of each month. Social Security pays out on the 2nd, 3rd, and 4th Wednesdays of each month based on your birth date (1st – 10th, 11th – 20th, and 21st – 31st, respectively).
Here’s a copy of the 2018 Social Security payment schedule:
As you can see, the first week of the month is for those receiving Supplemental Security Income (SSI) or those receiving both SS benefits and SSI payments. There are times when the SSA will pay these benefits in the last week of the month. You can see when this occurs by looking at the red circle above.
Maximizing Social Security
The payment dates have no effect on maximizing your Social Security. It’s just luck of the draw based on your birth date. Social Security is so complex with all the different variables put into the equation that the SSA uses to determine your payment amount. The biggest things that go into your Social Security payment are pretty cut and dry:
1) Highest 35 years of income – The SSA uses your top 35 years of income to determine your Average Indexed Monthly Earnings (AIME). AIME is your top 35 years of income divided by 420. The AIME amount is run through the bend-point formula to get your Primary Insurance Amount (PIA). The PIA is the amount you’ll receive at full retirement age. In general, the higher income you make, the more Social Security you’ll get. But Social Security is a progressive payment: lower income earners get more on a relative basis than higher income earners. That’s what the bend-point formula accomplishes.
SEE RELATED: How Much Social Security Will I Get?
2) Year you were born – You can start receiving your Social Security at age 62 with Social Security maxing out at age 70. Your full retirement age will fall somewhere in between those two ages depending on the year in which you were born. Those born between 1943 and 1954 have a full retirement age of 66. Those born between 1955 and 1959 will have a full retirement age of 66 plus 2 months for each year after 1954. For example, someone born in 1957 will have a full retirement age of 66 and 6 months (66 + (3 x 2) months). If you were born in 1960 or after, your full retirement age is 67. See the trend? They keep pushing the full retirement out because Americans are living longer among other reasons.
3) Spousal situation – Are you going to be claiming Social Security spousal benefits? If so, expect to receive half of what your spouse is getting. Of course, a multitude of scenarios could play out here. Your goal is to claim the benefits that give you the most money for your specific situation.
It’s best to get a cheap software program to run the numbers on various claiming strategies to see what works for you. This software coupled with a fee-only financial advisor’s input is worth the money. Your financial advisor may even have a software program to show you various claiming scenarios.
Social Security Rules of Thumb
I spent a lot of time running the numbers and have come up with some general rules of thumb for claiming Social Security. These are general rules that may change based on your specific scenario.
1) You have to consider the time value of money when thinking about Social Security. The break-even for time value of money and opportunity cost is 13 years. What does this mean? It means that you should claim Social Security at 62 if you don’t plan on living past the age of 75. If you plan on living past 83, then you should consider waiting until 70 to claim Social Security. It sounds ridiculous to try to figure out when you’re going to keel over in order to maximize your social security. I don’t know anyone that knows when they’re going to die unless they get some sort of terminal disease. Even those can be wrong.
2) You also have to consider the age differential between you and your spouse and other spousal items. If your spouse is more than 5 years younger than you, you have limited savings, and they didn’t make a ton of money in their career, then you’ll want hold off on filing until you’re full retirement age (at least). Your spouse will receive a higher survivor benefit if you wait. If your spouse has made fat stacks of cash during their career, then there’s no need to wait to file on their behalf. They’ll be okay if you keel over.
3) Low income Americans shouldn’t necessarily wait to claim Social Security either. You should start collecting Social Security right now if you’re 62 and have no income and no money set to come to you in the near future. Don’t wait! The exception to this rule is if you have a large 401(k) balance ( > $500,000). If that’s the case, withdrawing a living wage from your 401(k) until you reach full retirement age likely makes the most sense. You may be able to make your portfolio last forever if you follow certain guidelines.
4) Don’t claim Social Security just because you’re eligible. If you’re in your 60’s and don’t need the money, then the wait to file. You’ll get a higher monthly benefit amount if you wait to file. The only exception to this would have to do with taxes and becomes extremely complicated. Since Social Security income is tax advantaged, it may make sense to take it early and defer other income. This will probably be where a fee-only financial advisor comes in handy. They could get you tens of thousands more during your retirement by having a plan.