Social Security Timing Strategies

The most common questions individuals have about social security strategy include the following:

  • Why should I delay my retirement benefit?
  • Why should I consider spousal benefits?                                     
  • How can I maximize my spouse’s survivor benefits?

The information below is designed to help guide you through the answers to these questions.

Delaying retirement
If you are at full retirement age (FRA) and choose to delay receiving benefits, you will be eligible to receive delayed retirement credits. These credits increase your retirement benefit by a predetermined percentage of your primary insurance amount (PIA) for each month that you delay receiving retirement benefits, up to the maximum age of 70.

Example: A covered worker’s FRA is 66, and her PIA is $1,000. If the woman starts collecting benefits at age 62, her cumulative benefits will be $252,000. If, however, she waits to begin taking benefits until age 70, her cumulative benefits will increase to $316,800—a $64,800 difference.

Age

Covered Worker’s

Monthly Amount

Worker’s Cumulative

Benefits Until Age 90

62

$750

$252,000

63

$800

$259,200

64

$867

$270,504

65

$933

$279,900

66

$1,000

$288,000

67

$1,080

$298,080

68

$1,160

$306,240

69

$1,240

$312,480

70

$1,320

$316,800

Assuming covered worker’s PIA is $1,000, FRA is 66, and life expectancy is 90.

Spousal benefits[1]

Even if you have never worked under social security, you may be able to receive spousal benefits if you are at least 62 years old, as long as your spouse has already claimed his or her own retirement benefits.

Keep in mind, however, that if you elect to take spousal benefits before your FRA, your benefits will be reduced permanently by a predetermined percentage (based on how many months earlier you elected to take spousal benefits). If you choose to collect spousal benefits at your FRA, you will be eligible to receive full spousal benefits.

Example: If a nonworking spouse files for benefits at age 62, he will receive a cumulative benefit of $117,600. If, however, he waits until FRA, he will receive a cumulative benefit of $144,000, an increase of $26,400.

Age

Nonworking Spouse
Monthly Amount[2]

Spouse’s Cumulative

Benefits Until Age 90

62

$350

$117,600

63

$375

$121,500

64

$417

$130,104

65

$458

$137,400

66

$500

$144,000

67

$500

$138,000

68

$500

$132,000

69

$500

$126,000

70[3]

$500

$120,000

Assuming covered worker’s PIA is $1,000, FRA is 66 for both spouses, and life expectancy is 90 for both spouses.

Choosing the right strategy for collecting benefits relies heavily on your life expectancy. In the previous example, we assumed that the life expectancy was 90 years. Below, the graph represents the point at which it is more beneficial to collect an early benefit. If the person collecting spousal benefits expects to live beyond age 74, he or she is better off waiting until FRA to collect. If not, he or she should consider taking an early benefit.

SS-strategy-Jan-2019
Source: http://www.ssa.gov/


Claim now and claim more later
One strategy that may work for spouses with a substantial difference in their earnings records is for the spouse with the lower earnings history to file for benefits at age 62, while the other delays benefits as long as possible and earns delayed retirement credits. Once the second spouse files, the first is eligible for a benefit as a spouse, if it is higher than his or her current benefit. Remember that applying for benefits prior to your FRA will permanently reduce your social security benefits.

Survivor's benefits
If you are the widow or widower of a qualified person under social security, you may receive survivor benefits starting as early as age 60.[4] If, however, you elect to take benefits prior to your FRA, your benefits will be reduced.

Example: If the surviving spouse elects to collect benefits at age 60, she will have a cumulative benefit of $257,400. If, however, she waits to collect benefits until age 70, her cumulative benefit will be $316,800, a $59,400 increase.

Age

Surviving Spouse[5]

Surviving Spouse’s Cumulative

Benefits Until Age 90

60

$715

$257,400

61

$763

$265,524

62

$810

$272,160

63

$858

$277,992

64

$905

$282,360

65

$953

$285,900

66

$1,000

$288,000

67

$1,080

$298,080

68

$1,160

$306,240

69

$1,240

$312,480

70

$1,320

$316,800

Unlike spousal benefits, however, with survivor’s benefits you may switch over to your own benefits, if they are higher, at any time after age 62. In addition, you could collect your survivor’s benefit early and allow your own benefit to grow until you are age 70.

Determining the best strategy for claiming benefits varies substantially based on age, marital status, life expectancy, other retirement benefits, and your particular financial situation. Before you can decide when to take your retirement benefits, it’s necessary to check with the Social Security Administration to find out which benefits you’re entitled to claim. When you are ready to choose the best strategy for you and your family, be sure to call our office.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

© 2018 Commonwealth Financial Network®

 


[1]If a spouse receives a pension as a government worker, his or her social security retirement benefits may be reduced.

[2]If the spouse is eligible for retirement benefits on his or her own work record, social security will pay that amount first. But if 50 percent of the covered worker’s PIA is a higher amount, the spouse will get a combination of benefits that equals that higher amount. The maximum spousal retirement benefit is 50 percent of the covered worker’s PIA and is reduced for filing prior to the spouse’s FRA.

[3]Spousal benefits do not benefit from delayed retirement credits.

[4]A surviving spouse caring for the deceased’s child younger than 16 qualifies for benefits regardless of age at the time of claim.

[5]A surviving spouse is limited to the benefit that the covered worker would have received had he or she lived. Example: If the covered worker claimed benefits at age 62, the maximum benefit for the worker’s survivor would be $750 if the survivor delays claiming until FRA. If the covered worker delayed claiming until age 70, the maximum benefit would be $1,320 at the survivor’s FRA.