Mapping out your financial situation for retirement? Social Security benefits undoubtedly play a big part in your calculations. Do you know what your best options are? Filing early for benefits—like as soon as you turn 62—is rarely the best move. You may be eligible, but, according to this article from CNBC, “Here's when it makes sense to claim Social Security early,” taking benefits this early will reduce not only your lifetime earnings overall, but your monthly checks as well.
If you can wait and delay claiming benefits until your full retirement age (either 66 or 67, depending on when you were born), you’ll receive 100% of the benefit available to you based on your personal work record. If you wait until age 70, your retirement benefits will be even more. Delaying past full retirement age allows your benefits to grow by roughly 8% per year until you do retire. Therefore, waiting until 70 could increase your benefit amount to 132%. As a result, most experts recommend that you hold off on claiming for as long as you can.
Of course, these numbers are not the end all. There are health concerns to look at and your overall financial status as well. Essentially, pushing back retirement is based on the belief that you have a long life expectancy. Taking Social Security at 62 on the other hand may be wise if you are single, terminally ill, and know for a fact that you’re not going to live very long.
In most situations though, it doesn't make sense to claim early and take that permanent reduction. If you're married, claiming early could decrease the amount of benefits your spouse will have after you're gone. The spouse’s survivor benefit is permanent.
Survivor benefits are determined by the age a person dies and the amount of Social Security credits they’ve accrued. If you wait to claim benefits, you’ll have a greater number of credits, and thus a larger benefit to pass on when you die. How much of that amount survivors can access is based on when they claim the benefit. A person can file for widow or widower benefits starting at age 60. However, that benefit amount will be reduced. If a surviving spouse waits until their full retirement age, they are eligible to receive 100% of their spouse's benefit amount.
Those eligible for survivor benefits can decide between claiming those funds and their own retirement benefits, if they are eligible for them. That can include taking the survivor benefit, while letting their own benefit grow up to age 70. Those born before January 2, 1954 and who’ve reached full retirement age, can opt to receive their spousal benefit and delay taking their own retirement benefit. That would allow their retirement benefit to continue to grow. However, if you’re born after that date, you don’t have that option. You must choose between one benefit and the other.
Speak with an estate planning attorney to determine how Social Security fits in with your overall estate plan and tax liability. There are many moving parts and you do not want to make an expensive mistake.
To learn more about the ins and outs of social security, attend our in house client workshop led by social security expert Kurt Czarnowski on June 7, at 3:00 pm. Click here to register!
Reference: CNBC (March 10, 2018) “Here's when it makes sense to claim Social Security early”