Claiming Social Security Benefits

Claiming Social Security Benefits

When to claim Social Security is one of the most important financial decisions that retirees make, yet few seem to give it much thought. The longer one waits to claim, the higher the monthly benefit. For a retiree with a short life expectancy or pressing financial needs, it may be best to claim benefits as soon as possible. But for many others, waiting to claim Social Security can substantially increase expected lifetime benefits.

Those who qualify can start collecting benefits at any age from 62 to 70. Someone claiming Social Security at the full retirement age (FRA), currently 66, receives a full benefit. The benefit, which is based on a retiree’s earnings history, varies from person to person. Someone claiming Social Security at age 62 receives 75% of their full benefit, while someone claiming at age 70 receives 132% of it. Claiming benefits at age 70, as opposed to 62, raises one’s monthly benefit by 76%.[1]

Here are two strategies for couples to consider if you do not need all your benefits immediately.

The “file and suspend” strategy allows a couple to start receiving Social Security spousal benefits immediately while increasing future benefits. Under current law, an individual must claim their own benefits first before their spouse can claim spousal benefits. Using this approach, the primary earner files for benefits upon reaching FRA and then suspends receiving those benefits until a future date. The spouse can then claim a spousal benefit immediately. By waiting to claim, the primary earner will receive a larger monthly benefit when they do begin collecting. This also provides a higher survivor benefit for the lower wage earner if the higher wage earner predeceases him or her.

The “claim now, claim more later” is another strategy. Here the high wage earner files a restricted claim to receive only a spousal benefit based on the low wage earner’s benefit. This allows the high wage earner to claim a spousal benefit now (at FRA), and then claim a larger benefit later. For the high wage earner to be able to claim a spousal benefit, the low wage earner must first file for his or her benefits. Note that only one spouse can claim a spousal benefit at a time. The rules need to be followed carefully for eligibility.[2]

On the Social Security Administration website (ssa.gov), you can find answers to many of your questions including an estimate of your future monthly benefits. Consider your Social Security choices in the context of your overall financial picture. Because each individual situation is unique, you may want to consult a financial advisor.

The Menashe Morley Group: David Menashe is a Senior Vice President and Wealth Management Advisor, and Bruce Morley is a First Vice President and Wealth Management Advisor and John Naviaux is a Financial Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated, a registered broker-dealer, Member SIPC, and a wholly owned subsidiary of Bank of America Corporation. Investment products are not FDIC insured, are not bank guaranteed, may lose value. The Menashe Morley Group can be reached at 858-381-8113.

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[1] This is because 132% ÷ 75% = 176%. The 76% is in real terms. Because benefits are adjusted each year for inflation, the nominal increase in benefits would actually be more than 76%.

[2] There are additional rules and strategies for divorced individuals or survivors, beyond the scope of this article, that also warrant careful consideration.

Photo by Andy Templeton