Deciding When to Claim Social Security

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Provided by Ameriprise

Many Americans anticipate Social Security will help fund their retirement lifestyle. However, choosing when to claim may have implications on how much your monthly benefit will be. This is particularly true for married couples. Having a claiming strategy can assure you claim the benefit that’s best for you.

Earlier may not be better

Individuals can begin claiming Social Security benefits as early as age 62 or as late as 70. To qualify for what is considered the “full” benefit amount, baby boomers need to be at least 66 (even older for those born in 1955 or later). However, you earn a higher monthly benefit the longer you delay.

To determine when to start benefits consider:

  • Longer life expectancies. Social Security pays benefits no matter how long you live, but personal savings could be strained if you spend decades in retirement.
  • Earnings limits that apply if you continue to work. If you receive Social Security prior to age 66 while working, earnings from wages might reduce the benefits you can keep at that time.
  • Other assets you have available to fill any income gaps before you begin collecting Social Security. This includes savings and wages earned from work. If you are lacking other funding sources, you may need to begin collecting Social Security earlier to meet lifestyle expenses.

Spouses should plan together

For married couples, each spouse who is eligible for benefits can choose when they want to begin collecting Social Security. Generally speaking, the higher income earner will likely receive a higher Social Security benefit, and should delay claiming benefits as long as possible. This is because if that person passes away, the surviving spouse can claim the deceased spouse’s higher benefit in place of his or her own. A person reaching full retirement age can choose to “file and suspend,” a way of informing Social Security that you are able to claim benefits, but choose not to until a later date.

For a time, the law allowed one spouse to file and suspend benefits while a second spouse could begin collecting a spousal benefit. The second spouse could also implement a strategy known as a “restricted application,” delaying his or her own benefits until later in life, but in the meantime collecting the spousal benefit. Later, the second spouse could choose to collect a higher, personal benefit in place of the spousal benefit.

Important changes were implemented in 2015 that affect these strategies. When a person born after April 30, 1950 chooses to file and suspend (delaying their own benefits), the spouse will be restricted from collecting spousal benefits until the primary earner begins to collect as well. The new law will also do away with the ability of the second spouse to file a “restricted application” if they were born after January 1, 1954, so this person must choose either a benefit based on his or her own earnings or a spousal benefit, but not a combination of both.

It is also critical to determine how Social Security benefits fit into your overall retirement income strategy. Be sure to integrate your timing decisions with other aspects of your retirement plan.

 

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