When to Claim Your Social Security Benefits

Ssi and optionsTaking Social Security benefits early is advantageous in only very specific situations.

If you're getting ready to retire, you're probably already thinking about when to claim your Social Security benefits. Of course, when you turn 62, you’re eligible to file. However, grabbing benefits at the first opportunity will reduce your monthly paychecks and overall lifetime earnings.

However, if you can wait and delay claiming benefits until your full retirement age (either 66 or 67, depending on when you were born), you’ll receive 100% of the benefit available to you based on your personal work record. If you wait until age 70, your retirement benefits will be even more. Delaying past full retirement age, allows your benefits to grow by roughly 8% per year until you reach that age. Therefore, waiting until 70 could increase your benefit amount by to 132%. As a result, most experts recommend that you hold off on claiming for as long as you can. That can be a gamble.

The bet is that you’ll live longer and get more money. The government is asking you to make a calculated risk decision on what you had been mandated to pay into while taking a risk on the back end.

Taking Social Security at 62 may be wise, if you're single and terminally ill, and know for a fact that you’re not going to live very long.  However, in most other situations, it doesn't make sense to claim early and take that permanent reduction. If you're married, claiming early could decrease the number of benefits your spouse will have, after you're gone. The spouse’s survivor benefit is permanent.

Survivor benefits are determined by the age a person dies and the amount of Social Security credits they’ve accrued. If you wait to claim benefits, you’ll have a greater number of credits, and thus a larger benefit to pass on when you die. How much of that amount survivors can access, is based on when they claim the benefit. A person can file for widow or widower benefits starting at age 60. However, that benefit amount will be reduced. If a surviving spouse waits until his full retirement age, he is eligible to receive 100% of their spouse's benefit amount.

Those eligible for survivor benefits can decide between claiming those funds and their own retirement benefits if they are eligible for them. That can include taking the survivor benefit while letting their own benefit grow up to age 70. Those born before January 2, 1954, and who’ve reached full retirement age, can opt to receive their spousal benefit and delay taking their own retirement benefit. That would allow their retirement benefit to continue to grow. However, if you’re born after that date, you don’t have that option. You must choose between one benefit or the other.

Delaying will also help you with annual cost-of-living adjustments (COLA), which will be based on that higher benefit amount. This decision can be complicated, so speak with an estate planning attorney.

Reference: CNBC (March 10, 2018) “Here's when it makes sense to claim Social Security early”


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