Claiming Social Security Benefits can be one of the most important “retirement” decisions you will make. As our 62nd birthday approaches. We recieve notifications from the Social Security Administration, informing you about your claiming options. Most of us hard working americans have paid into Social Security System. We have the option to start receiving Social Security benefits anytime between age 62 and 70. If the government is writing you a check, shouldn’t you take it now? Not necessarily?!?!…
About 45% of Americans take their Social Security benefits the first chance they get.
For some, this is the right thing to do, but for others, they’re reducing their lifetime Social Security income.
With the passing of the budget in November 2015, Social Security options for spouses have taken a significant hit. Extra benefits like file-and-suspend and restricted applications are of the table (“for some”). So shouldn’t the higher-earning spouse take their benefits now? Not always. There are still a number of ways for spouses to maximize their claiming strategies and benefits.
One option is for the lower-earning spouse to claim benefits early, anywhere between 62 and full retirement age. This will provide a couple at least one old age survivor disability insurance benefit (OASDI) check. The higher-earning spouse would then let their delay and accumulate to age 70. The way OASDI is currently constructed, benefits will increase by 8% every year they wait until full retirement age. Keep in mind that their are over 1 million sets of calculations just for Claiming Benefits.
This allows the spouses to make up their Social Security as well as some of the benefits that the lower-earning spouse gave up by taking Benefits early.
Benefits payments are calculated by using actuarial assumptions. What this means is that the government can assume they’re going to pay out roughly the same benefits because someone may die in their 60s while someone else may live into their 90s. Your personal situation can contribute to when you start Social Security.
If you’re sick or have other health risks, it may be better to take your benefits at 62. However, if you’re in great health, married, exercise, and eat well, you could very well live into your 90s or 100’s. If this is the case, you have the potential receive more money from Social Security by delaying your first paycheck between 66 and 70 than you would by taking it at 62.
Obviously, there is no guarantee to how long you’ll live, but if you believe you’ll live into your 80s or beyond, delaying Social Security may help you more in your lifetime. Not to mention how you claim your OASDI benefits will impact your spouses survivor benefits.
We hear the doom and gloom about OASDI running out all the time. And while it’s true that Social Security as it stands can’t pay benefits forever. They’re going to make sure some sort of benefits will be paid. As of today, OASDI would run out in about 2034.3 However, anytime between now and 2034, benefits can be slightly reduced, extending Social Security even further.
It’s important to know that this isn’t the first time Social Security has been in danger of running out of funds. Previously, the government pushed back a person’s full retirement age in order to keep OASDI running. It may not be in the form it is now, but it’s not going away entirely.
So, you hear these reasons why you should delay Social Security, but how do you find out what’s best for your personal situation?
The best thing to do is to meet with a qualified financial professional who can run a complete Social Security analysis and incorporate retirement planning to show you what benefits you can receive each year, any spousal strategies you can take advantage of, and how life expectancy can impact your benefits. Not only do you want to work with a financial professional who understands your claiming options.
You also want to work with someone who can help you answer the 4 Toughest Financial Questions?
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1Annual Statistical Supplement to the Social Security Bulletin, 2013 (SSA 2014, Table 6.B5). 2https://www.ssa.gov/planners/retire/delayret.html 3http://money.cnn.com/2016/06/22/pf/social-security-medicare/
*Applies to people born in 1943 or later