There are alternatives as to when and how you claim social security and you should definitely know about them before you even think about signing up to collect your social security benefit. You have probably already heard the concept about claiming strategies available for your social security benefits. We provide planning advice on when and how to claim your social security. It is absolutely to your advantage to look at the options available to you for collecting social security.
Unless there are overriding health/longevity issues or minor dependents, claiming social security before full retirement age (FRA) is rarely a good idea. FRA falls between 66 and 67 depending on your birthdate. Waiting even longer from FRA until age 70 may earn you something like 8% a year under current deferred retirement calculations and may yield some great benefits for the surviving spouse. There are definite options for spousal benefits at FRA, especially if both spouses worked, but they must be carefully coordinated between spouses prior to making any claims for social security.
Claiming a spousal benefit then switching to your own benefit at 70 can be an excellent strategy, but make sure that the Social Security Administration understands that. I had a client on the phone trying to explain this strategy to Social Security. It took multiple calls before she got the message across that she wanted to claim her spousal benefit (half of her husband’s benefit) starting at her FRA. She had called just prior to reaching her FRA, so the Social Security representative was determined to start her on her own benefit. When she finally clarified that she didn’t intend to start until FRA and was deferring her own benefit until age 70, the rep congratulated her on what a great strategy that is!
It gets even more complicated if you are divorced or widowed. Depending on the length of marriage and your age, you might be eligible for benefits on that former spouse. Of course, you might choose to ignore those prospective benefits – just ask my widowed client who remarried before turning 60. She still teases me to this day about how she walked away from those widow benefits. Another client, who hasn’t yet remarried, was surprised and pleased that she could file at FRA for her spousal benefit on her ex-spouse and wait to collect her own benefit until age 70, thereby deferring and letting her benefit grow.
Of course, we can’t calculate much of anything without information on and projections of your social security benefits. The Social Security Administration is trying to make that easier for us by offering a my Social Security account to help people manage their social security benefits. Opening a personal my Social Security account at socialsecurity.gov/myaccount is a great idea.
The moral of the story is to make sure you know your options before calling or heading over to the social security office to start claiming your benefits.
Cathie Straub, CPA, CFP®
Director, APCM Wealth Management for Individuals