Social Security Options

1. Maximize the survivor benefits (married)

2. File and suspend (married)

3. Claim now, claim more later (married)

4. Delayed (single)

5. Divorced (single)

6. Widowed (single)

7. The “Do Over” Strategy (single or married)

8. Start, then stop, then start again! (single or married)

Then there are the complex multi-life strategies for special circumstances.

There are 8 primary strategies when
claiming your Social Security benefits.

Maximize the survivors benefits (married)

  • By waiting to activate your SS benefits it can be protection for couples in that the surviving spouse can choose between the two SS benefit amounts and select the higher rate. The husband’s SS benefit for example might be $2,000 a month, and the wife’s SS benefits might be $800. By the husband waiting to turn on his SS benefits until age 70, his benefits could grow at 8% from age 66 to age 70 and his benefit amount would be $2,720. This means the wife would have an additional $720 a month in support if her husband is deceased. This strategy is especially useful if the one spouse is healthy (wife) and the other spouse (husband) is not.

 

File and Suspend (married)

  • This strategy works best for couples who are a few years apart. One spouse (husband) reaches FRA at age 66. That spouse can “file and suspend”. This means this spouse (husband) will not take payments so his benefit amount will grow by 8% a year. The other spouse (wife) can now claim half or 50% of husband’s SS benefit amount without affecting the husband’s SS benefit. In our example by taking half of the husband’s SS benefits, this allows the wife’s SS benefit to grow by 8% a year. Warning! This 50% spouse benefit is reduced by 8% a year if wife starts it early. For example, husband is turning 66 for FRA. He files and suspends. Wife is turning 62 and is eligible to apply for a portion of the husband’s SS benefit. For each year she files early before her FRA of 66, the benefit check amount will be 8% less.
  • Husband’s SS benefit at 66 FRA = $2,000.
  • Wife files for half of her husband’s SS benefits at her 66 FRA= $1,000 (50%).
  • If wife files for half at age 62 when she is eligible, she will receive approximately 32% less than the 50% amount.
  • At wife’s 62 age $1,000 would be reduced to $726 a month of her husband’s SS benefit.

 

Claim now, Claim more later (married)

  • This strategy works best if a couple has very different earnings history.  For example:
  • Husband’s FRA amount is $2,000, wife’s amount is FRA $1,000.
  • Wife files for her benefit at age 62 (4 years early) and receives her discounted rate of $750. Her $750 + His $2,000 = $2,750.
  • But husband who is 66 does not take his SS benefit but files for half of wife’s original $1,000 since he is 66 and receives $500 (50%).
  • Together they will receive $500 + 750= $1,250.
  • Husband’s original SS benefit is growing by 8% and he files for his SS benefit at age 70. His SS benefit is now worth $2,640. Now their combined SS benefit jumped to $3,390! A difference of $640 a month, X’s 12 months is $7,680 a year. If they both live another 10 years, that’s an extra $76,800 in retirement benefits.

 

Delayed (single)

  • If single, waiting to start your SS benefits is going to make a large difference in your retirement years. It’s best to wait until FRA at 66 so you at least collect your full benefits. However if you continue to work past 66 and don’t need to start your SS benefits until a later date, your SS benefit is growing at 8% a year.
  • In an example of a single person having FRA SS benefits at $2,000 a month, the difference between starting your SS benefits early at age 62 is $1,500, at FRA 66 is $2,000, and by waiting till 70 is $2,640. From 62 to age 70 that is a $1,140 a month difference in SS benefits.

 

Divorced (single)

  • If you were married at least 10 years and are now divorced, you are eligible to collect 50% of your divorced spouse’s SS benefits. In our example, divorced spouse (Husband) must be 66 and have started taking their SS benefit. You (wife) can file for half of his SS benefits as early as 62. But keep in mind that at 62 your 50% will be discounted 8% a year. While taking 50% of ex-spouses SS benefits, you are allowing your SS benefits to grow by 8% a year. At the point your SS benefits become greater than ex-spouse you can switch. In the event yours never grows to more than 50% of ex-spouse’s keep the 50%.

 

Widowed (single)

  • You can select one of two ways for benefits at age 62. But as we keep repeating, it’s best to wait until FRA at 66. You can choose to take your discounted SS benefits at age 62 then switch to your deceased spouse’s benefits at your FRA at 66. Or you can start with your deceased spouse’s benefits at age 62 and switch to your FRA 66 SS benefits. Do the math and see which method will yield the most in SS benefits.

 

The “Do Over” (married or single)

  • You started taking SS benefits early because you needed the money due to, for example you didn’t have job income. A few months or even a few years into your discounted SS benefits you get a job and stop your SS benefit payments. You reach your FRA at 66 and want to turn your SS benefits back on again. With is situation you have a one-time opportunity to pay back all of your SS benefit funds you received in a one-time lump sum to SS, and then receive your FRA SS benefit at the higher amount instead of the discounted amount you started at 62. While you were working you also increased the amount of SS benefits your will receive at the higher rate.

 

Start, Stop, then Start again (married or single)

  • Let’s say you started your SS benefits at 62, and you stop your benefits at age 66 until you turn age 70. You will get an 8% increase in your SS benefits by using this Start, Stop, and then Start again. Over that 4 year Stop period you would increase your SS benefit amount by a whopping 32%. For example, a $1,000 payment you started early at 62, stop at 66, then start again at age 70, would be an increase of $320 a month for the rest of your life.

 

One rule to keep in mind with all of these strategies is that you can only have one benefit at a time!

For example; you can’t collect widower’s benefits and also collect your SS benefits at your FRA. You need to find out which is larger and choose.

Claiming Strategies

Here are some basic topics about your Social Security Benefits we will cover before listing your strategies. Full Retirement Age (FRA) Social Security benefits are currently available at age 66. You can take your Social Security benefits as early as age 62. However this will greatly reduce your monthly benefit amount. Each year you take your Social Security benefits early will cause your benefit amount to be 8% less. For each year you wait to take your Social Security benefits after age 66 (FRA) your benefits grow by 8%.

For example, Full Retirement Age is 66 and your SS benefit amount is $1,000 a month. If you took it at age 62 it would be reduced to $750 (- 8% a year). If you wait until age 70 your SS benefits will have grown to $1,320 (+ 8% a year). Between 62 and age 70 that is $570 a month difference!

If you take your SS benefits before FRA of 66 you will also be “earnings limited” to $15,700 a year in income. If you make over that amount your SS benefits will cease and even possibly have to be repaid depending on income.

 

High income earners must also take into account caps placed on individual and family Social Security Benefits. In some cases the benefit will not increase because of the limits. In these cases taking the income at FRA or sooner may be considered optimal. Everyones situation is different!

 

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