Social Security Rules and Strategies
We often get questions about Social Security rules and strategies. Commonwealth Financial Network provides some excellent advice about when to apply for Social Security. Don't miss it.
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The "Magic Age": What You Need to Know About Social Security Claiming Strategies
You may have heard that choosing the right social security claiming strategy can help you and your spouse maximize your benefits. But which strategy is best? What's the appropriate age to claim? What about spousal benefits? If you're wondering which path to take, these social security basics may help you get started.
When is the right age to claim?
Retirees can apply for social security anytime between ages 62 and 70. But, until you or your spouse reaches your full retirement age (FRA), you won't be able to take full advantage of social security claiming strategies. For many of today's retirees (those born between 1943 and 1955), that "magic age" is 66.
When determining the best age to claim, keep these considerations in mind:
- Claiming at 62 can permanently reduce not only your benefits but also your spouse's survivor benefits.
- Claiming prior to FRA means you automatically apply for both your worker benefit and any additional benefits you qualify for as a spouse, assuming your spouse is already receiving benefits.
- Claiming after your FRA allows you to take one benefit or the other, switching them at a later date, if advantageous.
- Delaying your claim until age 70 maximizes your benefit and locks in the highest possible benefit for a widow or widower. Keep in mind, however, that you may need to bridge the income gap by drawing down your retirement portfolio.
- A note on survivor benefits: A surviving spouse can claim either his or her own benefit or the survivor benefit independently prior to FRA, then switch to the other benefit after FRA.
Making the most of spousal benefits
It's a common assumption that, if both spouses delay claiming social security until age 70, they can maximize their monthly benefits. That's not always the case, however. To help ensure that you don't leave money on the table, here are a few possible strategies to consider. (Note that, for a couple to take advantage of these strategies, at least one spouse must have reached FRA.)
- Claim the spousal benefit when one spouse reaches FRA. You can only earn delayed retirement credits on your own worker benefit, not by delaying the spousal benefit. If your spousal benefit will always be greater than your own benefit, it makes sense for you to take advantage of the spousal benefit sooner rather than later.
- "Claim now and claim more later." With this popular strategy, you apply for social security at FRA but suspend payments until age 70. This allows your spouse to submit a restricted application for spousal benefits if he or she has also reached the magic age. In the meantime, both of you will continue to earn delayed retirement credits on your own worker benefits. Then, when each of you reaches ages 70, you can apply for your maximized benefits.
- Claim the lower benefits first. If, for cash flow purposes, you have to claim before both spouses reach FRA, it may make sense for the spouse with the lower benefit to claim at 62; meanwhile, the other spouse waits until his or her FRA and files a restricted application for spousal benefits. Then, at age 70, the one receiving spousal benefits switches to his or her own higher worker benefit, and the other spouse can switch to the spousal benefit, if it's higher.
Beyond the basics
Clearly, when it comes to determining the optimum social security claiming strategy, numerous variables are at play. For instance, if you and your spouse have shortened life expectancies, a delayed claim may shortchange you. Your financial advisor can help you evaluate the benefits of different strategies and find the option best suited to you and your unique situation.
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