Solving the Social Security Claiming Quandary
Making the right decisions on claiming Social Security benefits can increase what you ultimately receive by tens of thousands of dollars. Understanding the ins-and-outs of the rules and the myriad options available is mind-numbing. Trying to read-up on the subject can make your eyes bleed. (You get my point.)
Fortunately, we have invested in our ability to cut through the confusion and provide you with a detailed analysis of the different options for claiming Social Security benefits. Please contact me if you, or anyone you know, is interested.
When is the best age to start claiming benefits? Is it worth it to start early or wait? How does marriage, divorce, or being a surviving spouse change the determination? The following discussion briefly highlights the significant financial consequences that can result from how you answer these questions.
If you are single, the biggest question is one of timing. Currently, the full retirement age is 66. (It will increase for younger people). Claiming benefits at 62 reduces your benefits by 25%, but waiting until age 70 gets you an 8% per year increase in benefits between 66 and 70. Obtaining a guaranteed 8% increase is a valuable return if you can afford to wait. I can assist you with determining the breakeven point for such a delay.
If you are married, the methods for structuring the decision to maximize benefits are varied and complex. As an example, let's look at Joe and Sue Retiree. They're both 63 years old. Joe expects to live to 84 and Mary 92. Their monthly full benefit amounts at age 66 are $2,500 and $2,000, respectively. The difference in the amount of benefits achieved over a lifetime, based on utilizing different claiming strategies, is astounding.
If Joe and Sue live to their life expectancy and use a multi-step "file and suspend" approach, their lifetime benefits are about $1,382,000. If they each wait until age 66 to make a claim, their total benefits are $1,218,000. The difference is $164,000! The discrepancy is even greater if Joe and Sue immediately claim benefits. (The "file and suspend" method is not as beneficial if the Retirees do not live as long as expected, but an analysis will show the possible trade-offs to be made.)
Different considerations arise if you are divorced or widowed.
This discussion can in no way capture the complexity of the issues involved (nor does it constitute advice on when to claim Social Security benefits). Hopefully, this will spur you on to explore these issues further. Please let me know if we can be of assistance.
Words of Wisdom
My grandmother is over 80 and still doesn't need glasses. Drinks right out of the bottle.
–- Henny Youngman