Written by: Sarah Caine, CFP®
In my last blog post, I told you when you can start collecting Social Security benefits, but when should you do so? Many people think it’s best to begin collecting Social Security benefits as soon as possible – I’ve heard more than one person say, “My father died young; I’m going to take my benefits while I can.” And while collecting early is sometimes the best choice, it’s often better to delay claiming benefits until your Full Retirement Age or beyond.
When you should start collecting Social Security benefits depends on a lot of different factors, including:
- Overall health and life expectancy
- Marital status
- Age difference between spouses
- Opportunity to claim on someone else’s benefit in addition to your own (whether it is a current, divorced or deceased spouse)
- In a multiple benefit situation, the dollar amount of the difference between benefits
In addition, there are some Social Security collection strategies you might be able to use to maximize the benefit you receive, either as an individual or as a family. These strategies differ depending upon the composition of your family.
If you’re single, your decision about when to claim benefits is pretty straightforward; it’s mostly based on your health and life expectancy. If you live exactly until your actuarial life expectancy, you’ll receive approximately the same amount of money from Social Security regardless of when you file for benefits. So if you think you’ll die young, file early. And if you think there’s a good chance you’ll live a long time, or you’re worried about outliving your money, delay – and lock in a higher benefit.
If you’re married, it gets a lot more complicated, because you can each claim on your own record and/or your spouse’s record. You should look at Social Security with a goal of maximizing family benefits. Here are some tools you can use:
- Spousal Benefit: This is 50% of the worker’s Primary Insurance Amount (PIA) if you start collecting at your Full Retirement Age (FRA), reduced if you collect early. Important note: There are no delayed retirement credits here; the maximum benefit you get on a living spouse’s record is what you get at FRA.
- Claim Some Now; Claim More Later: This was a popular strategy for years, but since the Bipartisan Budget Act of 2015, it only works for people born on or before January 1, 1954. If your spouse is currently collecting Social Security benefits and you are at or over FRA, you can file a Restricted Application for Spousal Benefits Only. This enables you to collect a benefit of 50% of your spouse’s PIA while allowing your benefit to accrue delayed retirement credits.
If you’re divorced, but you were married to the same person for 10 years or more and you are currently unmarried, you can claim on your record and/or your ex-spouse’s record. The maximum benefit you can receive on an ex-spouse’s record is 50% of his/her PIA. If you were born on or before January 1, 1954, you may use the Claim Some Now; Claim More Later strategy detailed above.
If you’re a widow or widower, and you did not remarry before age 60 (or you remarried before age 60, but the marriage has ended), you can claim on your record and/or your deceased spouse’s record. You can file for a reduced widow’s benefit at retirement or age 60 or later, and then at age 70, switch to your own benefit which will have grown.
An important note if you’re divorced or widowed: If you log on to the Social Security Administration’s website, you will not see the benefits to which you are entitled on your previous spouse’s record. You will need to visit a Social Security office to get that information.
It’s a lot to think about. If you’re an Agili client, call us; we can help. If not, we welcome the opportunity to discuss your financial future with you – get started now – or you can make an appointment at your local Social Security office.