United States

Social Security planning: Considerations to increase your benefits


The age that you begin receiving Social Security benefits can significantly affect your retirement income and income that is available to your survivors.

Currently, the earliest age at which you can receive Social Security retirement benefits is 62, but if you choose to take benefits before your full retirement age (66 to 67, depending on the year you were born), your benefit will be permanently reduced by as much as 30 percent. On the other hand, if you delay receiving Social Security benefits past your full retirement age, you'll receive delayed retirement credits, which will increase your benefit by 8 percent for each year you delay, up to age 70. There is no additional benefit increase after you reach age 70, even if you continue to delay taking benefits.

Longer life spans create risk.

You may ask why it is risky to live longer than expected, but the fundamental risk for retirees is longevity risk.  Longevity risk is the risk of running out of assets before you die.  Due to great medical advances, people are living a lot longer than they have in the past.  This is putting more pressure on retirement savings because individuals need to live off of those savings for a longer time.  On average, a 66 year-old is now expected to live to age 85. Therefore, around half of new retirees will live longer than age 85, possibly much longer.

Your health is a factor.

Delaying your social security start date will reduce longevity risk because you will have a higher monthly payment. A higher monthly payment will reduce the need for you to use savings to cover expenses.  If you expect to live longer than average, this may be the strategy for you. However, if you have reason to expect to live shorter than average it may actually be beneficial to start your payments early.

Spouses are entitled to benefits.

You are eligible to receive half of your spouse’s benefit amount at full retirement age while your spouse is still alive.  After your spouse has died, you will be eligible for 100 percent of their benefit.  However, if you also receive a benefit from your own earning’s record, you will not be able to double dip.  You will only receive the larger of the two benefits – your own or your spousal benefit.

You can still receive spousal benefits if divorced.

If you are divorced, but your marriage lasted at least 10 years, you can receive benefits on your ex-spouse's record (even if he or she has remarried).  You must be unmarried and be age 62 or older to collect the benefits. Again, you are not eligible for spousal benefits if your benefits based on your earnings records is greater than the spousal benefit.

Determining when to file for Social Security benefits is one of the biggest financial decisions you'll need to make as you approach retirement. There is no "one-size-fits-all" answer. It is an individual decision that must be based on many factors, including other sources of retirement income, whether you plan to continue working, how many years you expect to spend in retirement, and your income tax situation. It is especially complicated when you are married because you and your spouse will need to plan together. You will need to take into account the Social Security benefits you each may be entitled to, including survivor benefits.


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