If you are nearing retirement age, determining how to get the most out of social security benefits can often mean a huge difference in the years to come. By following what most Americans do and rush to receive benefits at 62 years old you could missing out on up to 75% more monthly benefits. These decisions should be considered before claiming benefits and you should understand your full range of options.
SSI and Age
Although you can claim SSI at 62, should you? The answer is in most cases that you should wait because of the reduction penalties you will receive from taking your benefits before full retirement age (FRA). FRA is 66 for those born between 1943 and 1954 and 67 for those born after 1960. As an example of what you can lose by claiming benefits early, the reduction table should be consulted for your planned retirement.
As an example, someone born in 1960, still married and both partners claiming benefits at the earliest possible stage would result in a reduction of 30% for the primary earner and 35% for the secondary earner. Over the span of 10-20 years, this can mean literally tens of thousands of dollars per couple.
Of course money is not always the only factor that you need to consider but knowing just how much less you will get over the long term can help you delay our decision to claim in the right circumstances. There is generally no sense in delaying your claim past FRA and in situations of poor health or a shorter life expectancy there can be a case for claiming early. In most other situations, you will want to wait till as close to 66 as possible.
In addition, there are ways to utilize loopholes to access interest free social security loan so to speak. You can essentially collect payments now, use the for your needs and then repay the amount you borrowed and restart your entitlements.
Get What’s Yours
As you worked your entire life for these benefits, it is in your own interest to maximize what you get and to get as much of the benefit as possible. If you are married the one way to do this is to “File and Suspend.” This allows the primary earner with the higher income to file their claim at 66 (or earlier) and immediately suspend receiving their benefits. This deferring their benefits actually allows your claim to grow by 8% per year of the suspension, but more importantly allows your spouse to claim spousal benefits.
As a couple, you can never both get full benefits, so the best scenario is for one person to receive full benefits and then switch to the other person to receive full benefits while the first still receives spousal benefits. This allows for the maximum claim amount and maximizes your SSI benefits. Many seniors try to do this by staying employed in these interim years, even if it’s part time work to keep up with expenses.
Another advantage to this strategy is that if a partner dies before the other starts collecting the widow or widower gets the higher of the two claims either the survivor benefit or the widow benefit. This allows for the maximum claim even when one of the couple passes away.
Maximize your benefits by waiting as late as possible and filing and suspending the claim of the higher wage earner.