More than two-thirds of Americans claim their Social Security retirement benefits early, many filing at age 62. Many people do not realize that they have given up a significant amount of future benefits over their remaining life. Claiming benefits early may also affect your survivor benefit amount. The most basic early eligibility requirements are that you have attained the age of 62 and have accumulated 10 or more years in a job in which you paid Social Security taxes. Depending on your age, there is a reduction of between 20% and 30% in benefits for filing early.
Planning Tip: Social Security do-overs are allowed within 12 months of commencing benefit payments. You are allowed a one-time do-over and must repay all benefits received.
Planning Tip: If you were born before January 1, 1954, the Restricted Application option is available to you. If you can forego your Social Security benefits for a few more years, you may be able to voluntarily restrict an application to only spousal benefits, for example while allowing your benefits to earn “delayed retirement credits”. If the benefit amount is suspended at age 66 until age 70, your monthly Social Security benefits will be 32% more.
Consider the following hypothetical example. George is 62 and his full retirement age (FRA) is 66. If he starts taking benefits at 62, he will receive $1,200 a month. If he waits until his FRA to collect, he will receive 33% more or $1,600 a month in Social Security. If George waits until 70, his benefits will increase another 32%, to $2,112 a month. If he lived to age 89, his lifetime benefits would be about $38,000 or 13% greater if he had waited until 70 to collect Social Security.
Planning Tip: Married or divorced, you should consider spousal benefits in either situation. Spousal benefits are an often overlooked source of income in divorce situations. A divorcee is entitled to benefits based on his or her ex-spouse’s earnings history (50% of your ex-spouses benefit). The basic requirements for divorce spousal benefits are:Social Security Planning Tips
- You and your ex-spouse are eligible for Social Security benefits;
- You remain unmarried;
- Your marriage lasted at least 10 years;
- You are at least 62 and;
- Your spousal benefit is greater than your own benefit
For currently married spousal benefits you must be at least 62 and your spouse must file for their own benefits first. You are automatically entitled to receive the benefit that provides you the higher monthly benefit amount; either a benefit based on your own earnings history or 50% of your spouse’s benefit.
Planning Tip: If you are entitled to a spousal benefit and begin collecting this benefit before you reach full retirement age, your benefit will be permanently reduced. Depending on your specific circumstances, health, etc. you should consider the increased benefit amounts available by waiting until full retirement age.
When and how to claim Social Security may be one of the most important decisions you make regarding your retirement. We are here to help. We can prepare a Social Security Strategy and Analysis that will maximize your lifetime benefits based upon your personal circumstances, age and earnings history. Call us today if you think you may benefit from such an analysis.