This article was drafted during the Thanksgiving holidays and on returning home, I noticed that many of these suggestions are in the January 2015 issue of Kiplinger’s Personal Finance. Although all of this information is readily available in my profession, I feel that it’s proper to cite this publication.
Depending on your marital status and health, these suggestions might or might not be attractive.
The first and most obvious is to not apply unless you need Social Security for living expenses. There’s a world of difference between starting at ages 62, 66 or 70, specifically some 8% yearly. It doesn’t matter if you’re married, single or divorced to utilize this one. Again, there is no reason to delay your filing past age 70.
Assuming that the primary earner has reached full retirement age, “file and suspend” could be attractive. The higher earning spouse files for his or her own benefits then suspends payments. Then, the lower earning spouse may collect a spousal benefit of up to half of the higher earner’s benefit, depending on his or her age. The higher earner can continue working to earn additional income after age 66.
A “voluntary suspension of benefits” can be useful in your planning if you started benefits prior to reaching full retirement age. For example, if you claimed Social Security at age 62, but at age 66 can do without those funds, you can suspend benefits. Possibly a pension or other retirement plan has kicked in. Here you will increase your benefits by 2/3 % monthly or 8% per year of suspended benefits.
If an older spouse has higher earnings, there is a strategy termed “withdraw now, withdraw more later”, that can increase benefits. Here, the higher earner has an opportunity to take the full retirement or a spousal benefit. If a spousal benefit is chosen, the higher earning spouse can continue to accrue additional retirement credits.
You can also “restrict an application” to obtain the highest benefit at age 70, by applying for a spousal benefit. The lower earning spouse claims first, then the higher earner files for benefits based on those earnings.
There are also divorced spouse benefits. If your marriage lasted 10 years, you are 62 or older and unmarried, it’s worth a look. Your retirement benefit must be less than the divorced spouse. If you meet these qualifications, you can apply for up to half of your former spouse’s benefit if he/she is still alive. This does not affect benefits for divorced spouses who have remarried.
Finally, specialized annuities have been developed that can assist couples or singles looking to maximize their Social Security benefits. If you have not started taking payouts from Social Security, this is well worth your time to investigate.
Believe it or not, there are nearly 75 claiming options for Social Security. Make sure you pick the one that’s best for your situation.
Mike Lassiter is a Chartered Life Underwriter and Chartered Financial Consultant. He is a Licensed Insurance Counselor and a Registered Investment Advisor. He can be reached locally at 770-786-2781.