Taking these steps before you begin claiming can ensure you’re receiving as much money as possible.
The majority of retirees will depend on their Social Security benefits for at least a significant portion of their income. In fact, half of married couples and nearly three-quarters of unmarried beneficiaries rely on their monthly checks for at least 50% of their retirement income, according to the Social Security Administration.
Social Security benefits can potentially make or break your retirement, so it’s crucial to have a strategy behind how and when you choose to file for benefits. Before you start claiming, make sure you do these three things.
1. Decide what age you should claim benefits
You can file for benefits as early as age 62, but you won’t receive the full benefit amount you’re entitled to each month unless you wait until your full retirement age (FRA) — which is age 67 for those born in 1960 or later, or either 66 or 66 and a certain number of months for those born before 1960, depending on the exact year you were born.
You can also receive bigger checks by waiting until after your FRA to begin claiming. If you have a FRA of 67, you can earn an additional 24% on top of your full benefit amount by waiting until age 70 to file for benefits. On the other hand, if you claim as early as possible at age 62, your benefits would be reduced by 30% for the rest of your life.
The system is designed so that, theoretically, you should receive the same amount in lifetime benefits no matter when you begin claiming. If you claim earlier, your checks will each be smaller, but you’ll receive more of them over a lifetime. And if you delay benefits, you’ll receive bigger (but fewer) checks.
However, these calculations assume you’ll live an average lifespan, which is around 85 years, according to the Social Security Administration. If you live a longer- or shorter-than-average lifespan, you could receive more money over a lifetime if you claim early or delay benefits. So if, for example, you’re battling health issues and don’t expect to live into your mid-80s or beyond, it may be wise to claim earlier. But if you’re in peak physical condition and expect to enjoy an extra-long retirement, delaying benefits may be in your best interest.
2. Consider creating a claiming strategy with your spouse
If you and your spouse are both eligible to collect benefits, it’s smart to come up with a strategy for when you’ll each claim. For instance, you may decide that the lower-earning spouse should claim early so you both have some extra cash to enjoy now, while the higher-earning spouse delays benefits to earn those fatter checks for the rest of retirement.
Also, although it’s not the most enjoyable topic to think about, consider both of your life expectancies and how the surviving spouse will make ends meet if the other spouse passes away. When one spouse dies, the surviving partner may be entitled to receive the deceased person’s entire benefit amount in survivors benefits.
If, for example, you have reason to believe your spouse will outlive you and you’re the higher earner between the two of you, it may be wise for you to delay benefits so that your spouse will receive bigger checks in the event that you pass away first. Keep in mind, though, that the surviving spouse won’t receive his or her own benefit amount in addition to survivors benefits — only the higher of the two amounts. So if you pass away first but your spouse was already receiving more than you in benefits, your spouse might not be entitled to extra money in survivors benefits.
3. Make sure you know all the types of benefits you’re entitled to collect
You may be eligible for your own retirement benefits, and some people can collect survivors benefits if a loved one passes away. But there are a couple of other types of benefits out there, and if you’re not taking advantage of them, you may be missing out on extra cash.
Two of the more common types of benefits are spousal benefits and divorce benefits. To be eligible for spousal benefits, you must currently be married to someone who is eligible to receive Social Security benefits. For divorce benefits, you must have been married for at least 10 years, and you cannot currently be married. In both cases, the maximum amount you can receive is 50% of the amount your spouse (or ex-spouse) can collect by claiming at his or her FRA.
Similar to survivors benefits, you cannot receive your full benefit amount plus your entire spousal or divorce benefit amount. If your benefit amount is less than what you could receive in spousal or divorce benefits, the Social Security Administration will pay your benefits first. Then if you’re entitled to more money based on your spouse or ex-spouse’s work record, you’ll receive a little extra each month. And if your benefit amount is higher than 50% of the amount your spouse or ex-spouse is entitled to at his or her FRA, you may not be eligible for spousal or divorce benefits at all.
Social Security benefits can be a lifeline in retirement, but it’s important to make sure you’re doing everything you can to maximize them. By taking these steps to ensure you’re making the most of your benefits, you’ll be setting yourself up for a much more enjoyable retirement.
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