It seems simple enough: build a career, work for several years, retire and collect monthly social security checks for the remainder of your life.
But as with most thing in life, the simplest route may not always be the best. That’s because factors such as your age, health and marital status can greatly impact the amount of your monthly social security checks. In the years before retirement, strategize carefully and consider all your options before claiming benefits.
Consider these factors:
- Spousal benefits. If you have been married for at least 10 years, you can claim social security benefits based on your spouse’s income starting at 62 years old. This is true even if your spouse continues to work. One such strategy suggests having him claim benefits at 62 to trigger the start of your spousal benefits, but then immediately suspend his claims until he is 70 years old. By delaying his benefits, he will receive a higher monthly check for life when he does begin getting the payments as the program rewards seniors who delay starting benefits. Meanwhile, you begin collecting monthly spousal checks at the soonest possible time. The amount of the checks you will receive will be up to 50% of your spouse’s benefits, which will be calculated relative to his full retirement age. There are additional rules and guidelines that must be met to make sure people do not double dip into the system. That includes not allowing you to claim benefits both on your work history and your spouses. This strategy is just one possible option that may work if you are either a non-working spouse or have not built up your own social security benefits sufficiently.
- Your marital status. Many people are unaware that they can claim spousal benefits even if they are divorced. If you were married for at least 10 years, you likely qualify to get social security based on your ex’s income. If you have a dependent child under 16, you may also qualify for benefits on your ex-spouse’s work history. Same-sex couples also receive the same benefits in all 50 states as determined in the 2015 US Supreme Court landmark case of Obergefell v. Hodges.
- Your age. The social security administration is created to supplement people’s retirements based on average lifespans. While you can start taking benefits at 62, you will receive bigger monthly checks for your entire life if you wait until your full retirement age (FRA). For most people, that age is 66; use this chart to determine your exact FRA based on the year you were born. But if you delay until the maximum allowed 70 years old, your checks will increase by 8% for each of those years. Consider the difference between getting $2,000/month at 67 with $2,480/month at 70. In the end, you will likely get the same amount over your entire retirement. The big question is whether you want to spread that out via lower checks for more years, or bigger checks but for fewer years. That decision rests partly on how much you have saved up overall for your retirement. But it also depends on the next point.
- Your health. If you are physically and mentally healthy and longevity runs in your family, it probably makes sense to delay claiming benefits until the maximum allowed age of 70. But if you are already dealing with health issues and foresee a shorter life, consider claiming your benefits earlier.
The decision about when to claim social security benefits should be made carefully. Examine your entire financial portfolio first and establish what your overall retirement income will be based on assets, investments, retirement accounts and savings. Meet with a financial advisor and tax expert to strategize.
At Silverman Financial, we are financial retirement planning experts and can help you determine the most advantageous time to begin claiming social security benefits.