Make the Most of Social Security

Consider these moves to maximize your benefits.

Deciding when to begin collecting Social Security benefits could be one of the most important retirement-income decisions you'll make. Although it can be complicated, some excellent tools are available to help you figure out your optimum claiming strategy.

AARP offers a free Social Security benefits calculator that gives you a good idea of how large a benefit you can expect, based on when you claim it. It works for both married couples and singles, including those who are widowed or divorced. But if you want a more precise picture of the impact on your monthly and lifetime income—and are willing to pay a modest amount for recommendations that could lead to thousands of dollars of extra income each year -- go to SocialSecuritySolutions.com. Use promotion code KIP for a 10% discount on personalized reports that range from $20 to $125 (the top-tier package includes live consultations with a Social Security claims expert). In most cases, it makes sense to wait until your normal retirement age -- currently 66 for anyone born from 1943 through 1954 -- to collect benefits. At that point, two things happen: You are no longer subject to the earnings cap (meaning you can continue to work without jeopardizing any of your Social Security income), and you can get creative with your collection strategy to maximize your benefits. In 2012, you lose $1 in benefits for every $2 you earn over $14,640 if you claim benefits before age 66 and continue to work.

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Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance