You’ve spent your entire career saving and planning for a long and happy retirement. You’re counting on your Social Security benefits to represent a significant portion of your assets upon retirement. The question is, when should you begin claiming Social Security in order to maximize your benefits? Let’s review some of the basic Social Security claiming strategies so you can take full advantage of your benefits.
According to the 2017 regulations, a retiree can begin claiming Social Security benefits anytime between ages 62 and 70, according to the Social Security Administration. However, retirees won’t receive their full retirement benefit or Primary Insurance Amount (PIA) until they reach 66 (or 67 depending on birth year) years of age. The longer you can delay receiving Social Security benefits between ages 62 and 70, the larger your benefits grow. At 70 years of age, your monthly benefit is 76 percent higher than it would be if you started receiving benefits at age 62.
According to 2017 data compiled by the Social Security Administration, “A man reaching age 65 today can expect to live on average, until age 84.3. A woman turning age 65 today can expect to live, on average until age 86.6.” However, these life expectancies are estimates and not based on a retiree’s personal situation. Retirees with health issues, shorter life expectancies or a family history of premature death may want to consider claiming benefits earlier to maximize and enjoy their lifetime benefits.
When someone passes away, their survivors (spouse, children, parent) are eligible for survivor benefits. Delay in claiming your Social Security benefits until age 66 (or 67 depending on birth year) ensures that your benefits continue to grow for your beneficiaries. This is particularly important for married couples, in that the surviving spouse can receive the deceased’s monthly benefits payments if they are higher than their own. The longer a spouse waits to claim Social Security, the higher the monthly benefit for both the spouse and their surviving beneficiaries.
According to the 2017 TransAmerica study, “67 percent of Baby Boomers surveyed plan to continue working past age 65 or do not plan to retire at all.” The study also reports that only 34 percent of Baby Boomers expect Social Security to be their primary source of income during retirement. As of 2017, Social Security allows benefit recipients at full retirement age to earn up to $15,720 per year without it reducing their monthly benefit check. Be aware of the annual limits if you are considering part-time work. Some retirees earning additional income contribute to a Roth IRA. A Roth IRA doesn’t require a minimum distribution, so retirees can contribute to them for as long as they continue working. Additionally, because Roth IRA contributions are made with after-tax dollars, your money continues to grow on a tax-deferred basis for as long as it remains in the account.
Deciding when to claim Social Security is a major decision that can have long-lasting impacts on you and your family. You’ll need to consider your health, the feasibility of deferring or investing and the effects it may have on your surviving beneficiaries. Couples should coordinate their benefits claiming strategies to the extent possible. A financial advisor can assist in determining which Social Security claiming strategy is right for you.
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"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.