Maximizing Your Social Security Benefits: Part 1

Maximizing Your Social Security Benefits: Part 1

Social Security retirement benefits provide eligible workers, as well as their spouses, survivors and dependent children with monthly income. While this monthly benefit was never meant to replace all of your earnings, it serves as the base of retirement income for many older retired workers. In order to enjoy financial security and make the most of your retirement, it’s important to think hard about when to claim your benefit.

There are many strategies that can help you maximize your benefits—for you, your family and your survivors. Most of these strategies benefit couples who are currently married or are divorced, and many of them are designed to maximize lifetime benefits—or the amount you receive from the time you start claiming until your death. Most strategies are not intended solely to increase your monthly benefit. You should contactthe Social Security Administration to go over which strategy is best suited for your particular circumstance and preferences.

Wait to Collect

Who can use it? Those who are eligible for Social Security retirement benefits can delay claiming and receive a larger monthly benefit for life. Those who are the higher, or sole, earners in their family and those with a higher life expectancy should strongly consider this strategy.

At what age can you take advantage? In order to take advantage of the higher benefit that comes from delaying past the earliest age of eligibility, or 62, you must wait to collect your benefits and not collect at 62 (60 if you are a widow, widower).

How does it work? For every year you put off collecting between age 62 and 70, you’ll increase your benefit between 5 percent and 8 percent. If you can, consider tapping other retirement sources during those years.

How do I benefit if I’m married? If you’re married and/or you have dependent children, waiting to claim your Social Security benefit will mean a larger monthly benefit for your survivors.

Example: John is turning 68 next month and hasn’t claimed his Social Security benefits yet. John’s wife Beth is 58 and made substantially less than John over the course of her career, so her monthly Social Security benefit will be much lower. John plans to wait until age 70 to claim his Social Security so that not only will his own benefits be higher, but the benefits for his wife will also be higher while he is living and upon his death. Since he’s very healthy, he feels confident waiting until age 70 in order to provide a higher monthly benefit for his wife when he passes away.

File and Suspend

Who can use it? If you are married and/or have dependent minor children, you might be able to boost household income immediately and provide for a larger survivor benefit later by using the “File and Suspend” strategy. This strategy works best for one-earner couples where one spouse worked full-time and the other spouse did not work outside the home or did not work long enough to qualify for Social Security retirement benefits.

At what age can you take advantage? You must be at least full retirement age to use this strategy. It is not available to workers who claim benefits earlier.

How does it work? Social Security was designed at a time when most men worked full-time jobs and their wives stayed home and raised the children. Though that is not the norm today, the benefit structure has not changed. Therefore, when one spouse has made significantly less, Social Security ensures that the lower earning spouse will not be left without income if the earning spouse dies earlier.

To use the “File and Suspend” strategy, file for your retirement benefits at the full retirement age so your spouse or dependent children can collect their benefits based on your earnings record. Then, immediately suspend your own benefits and delay claiming them until they are worth more at an older age. Your benefits will increase by an additional 8 percent for each year you delay collecting beyond your normal retirement age, up until you turn age 70.

How do I benefit if I’m married? Once you file for benefits, your spouse can then claim spouse benefits. Then, at age 70, you can begin getting benefits but at a higher rate than if you had never suspended them.

File and Suspend + Claim Now, Claim More Later Strategy

Who Can Use it? Working couples who are close in age and who each qualify for Social Security benefits on their own record.

At what age can you take advantage? Both members of the couple must be at least full retirement age to use this strategy. It is not available to workers who claim benefits earlier.

How does it work? This strategy combines both the “File and Suspend” and “Claim Now, Claim More Later” strategies.

To use this strategy, the older spouse claims retirement benefits and immediately suspends them, at the full retirement age, allowing his/ her own retirement benefit to grow (“File and Suspend” strategy). When the younger spouse turns full retirement age, he/she can then file for a spousal benefit only and allow his/her own retirement benefit to grow also (“Claim Now, Claim More Later” strategy). When both spouses turn 70, they can then file for their own retirement benefits, which have been maximized. Combining the two strategies maximizes the monthly benefit for the couple.