The choices you make around Social Security are important ones. There are many factors that go into making a great decision about how to maximize your benefits. A properly optimized Social Security timing strategy can add hundreds of thousands of dollars to the bottom line for a married couple.
In this three-part series, we are going to look at several factors that should be considered when making a claim for benefits, the first of which is timing. When should you take your benefit? The first age of eligibility is 62. Deferring when you start receiving Social Security means a higher monthly benefit. Full retirement age for most people is between 66 and 67 but benefits continues to increase all the way to age 70. Your benefit will increase by over 75% by virtue of delaying from 62 to 70.
A key question to consider is how long do you expect to live? Many people take their benefit early, concerned they will not live long enough to make up for the lost years of not collecting. However, longevity has been steadily increasing. According to the Social Security Administration (SSA) studies show, a man turning 65 today will live to be 84.3 on average, and a woman will live to be 86.6 on average. For a couple at age 65, the probability of one person living to their mid 90’s is 59%.
This is why it’s so important to have a claiming strategy to maximize your benefit. Here are three strategies to consider:
Long Life Expectancy
As a married couple, if both of you expect to live into your late 80’s or beyond, consider delaying both benefits until age 70 to receive the maximum benefit.
Staggered Life Expectancy
If you expect that only one of you will live well into your golden years, you may want to consider delaying the larger of the two benefits until age 70. This will allow the surviving spouse to take advantage of the Survival Benefit, which pays the higher of the two benefits for the remainder of the surviving spouse’s life. If this is the case, taking the smaller benefit early may be beneficial in creating a steam of income to use until the spouse with the larger benefit turns 70.
Shorter Life Expectancy
If both of you have reason to believe you will not live past age 80, then consider taking your benefits early. This could potentially put the most money in your pocket and maximize your benefit.
One other benefit that is worth noting is the Spousal Benefit. The Spousal Benefit allows anyone at full retirement age whose benefit is less than half of their spouses to receive the difference, up to half of their spouse’s benefit without any penalty.
As you can see the decision of when to claim a benefit is complex and has many variables. It’s wise to consult with your financial advisor before making any decisions. Please feel free to contact our office to learn more about which claiming strategy will maximize your lifetime benefits.