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Social Security: Aiming for smarter payments

Delaying your benefits for as long as you can could give you greater income for life. But is it the right move for you? These insights can help.


EVEN FOR AMERICANS WHO HAVE INVESTED DILIGENTLY for retirement over the years, Social Security benefits matter. One of the first big decisions we’re faced with as we approach retirement is when to claim our benefits — and timing is important. While you can start as early as age 62, waiting a few years or until you reach your full retirement age can substantially increase the amount you receive over your lifetime. See “Find Your Full Retirement Age” below.


We recently sat down with Ben Storey, director of Retirement Research and Insights at Bank of America, to get the latest thinking on what's important to consider as you make your decision.


Merrill: Ben, we're all living longer. Does that change how and when we claim Social Security benefits?


“Considering that one of the biggest concerns people have is outliving their money, waiting to collect benefits begins to make a lot more sense.”

Profile Photo - — Ben Storey, director, Retirement Research and Insights, Bank of America
— Ben Storey, director, Retirement Research and Insights, Bank of America

Ben Storey: Considering that one of the biggest retirement concerns people have is outliving their money, waiting to collect Social Security benefits begins to make a lot more sense than it might have in the past. Waiting to claim benefits can be a way of gaining a measure of protection against your risk of longevity.


Merrill: Talk a little more about that. How might postponing your payments work to your benefit?

Storey: Well, imagine that at age 66 you’re entitled to an annual Social Security benefit of $10,000. If you wait a year to claim it, you'll forgo the $10,000 for the first year, but the following year at age 67, you’ll receive an annual benefit of $10,800 or 8% more — an amount, by the way, that is adjusted for inflation, if any, each year for the rest of your life.

Merrill: Should women think of Social Security benefits differently?

Storey: Women typically live longer than men, and those extra years can make it especially important to find ways to boost income. Waiting longer to claim Social Security benefits is one strategy that can help do that. Take, for instance, a single woman who, instead of claiming benefits at 62, waits until 70 — the maximum age for boosting benefits — before claiming. For a person whose benefit would be $1,000 at full retirement age (age 67 in this example), waiting those extra eight years could increase her monthly benefit by 77% or about $540 each month.


Merrill: How does being married affect the decision to claim benefits? What’s the rule of thumb for couples?

Storey: It often makes sense for the higher earner — let’s say it’s the husband — to wait until 66, or even 70, to claim benefits. Doing so increases his benefits throughout his lifetime and, should he die first, throughout the remaining lifetime of his wife as well since her survivor benefit would step up to that of her deceased husband. If the earnings gap between the wife and husband is substantial, she might think about claiming her own reduced benefit at 62 if she has retired or has limited income. She could then switch to spousal benefits once her husband claims Social Security.


Merrill: And what are the rules for divorced couples?

Storey: If you are not currently married and you are 62 or older, you can file for spousal benefits whether or not your ex has filed as long as you were married 10 years and have been divorced for at least two years. To qualify, your ex must be entitled to benefits, and the benefit you would receive on your own work record must be less than what you’d receive based on your ex’s record. There’s a Social Security Administration web page that explains these requirements in more detail.


Merrill: Can you apply for a spousal benefit if your spouse hasn’t filed for benefits?

Storey: A married person can only apply for a spousal benefit if his or her spouse is receiving retirement or disability benefits. People can no longer file and then suspend their benefits, allowing them to grow while their spouses collect on their record as they could before May 2016. And if you were born after January 1, 1954, you no longer can “claim twice” — or file for spousal benefits at full retirement age while allowing your own future retirement benefit to grow.


Merrill: What’s your best advice for couples?

Storey: I’d encourage anyone approaching retirement age to speak with their financial, tax and legal advisors. When and how to begin claiming your Social Security benefits are important — and complex — decisions. And it can help to talk with those who understand the rules, as well as your personal situation.


Merrill: Is waiting always the right answer?

Storey: Waiting longer can increase the amount you receive over your lifetime, but what’s right for you may be very different from what’s right for me. You’ve got to consider your health and your family history — how long do people in your family tend to live, for instance? For example, if your parents and grandparents didn't live past 75, you are single (or married and survivor protection isn’t a factor) or have limited income from employment, it could make sense to claim your benefits as early as age 62.


Your other retirement assets also should be considered: Claiming your benefits earlier might allow you to delay drawing income from your portfolio and give it more time to grow. Also think about your goals and the kind of lifestyle you want in retirement as well as your immediate financial needs. A family caregiving situation could arise that requires your attention and financial support.


If, after you’ve considered all the factors, you feel that claiming your benefits before age 70 makes sense for you, you shouldn’t feel bad about not waiting. Social Security was conceived as a safety net. And it’s only valuable if you use it when you need it.



Find Your Full Retirement Age

If you were born on January 1, use the year before your date of birth to see when you become eligible to claim full benefits.


If you were born between 1943 and 1954 . . .

You could claim full benefits at age 66.


If you were born between 1955 and 1959 . . .

For each year of birth after 1954, the full retirement age increases by two months. (For example, the full retirement age if you were born in 1955 is 66 years and two months. If you were born in 1959, it’s 66 years and 10 months.)


For more on how much your benefits would be reduced by filing before your full retirement age, see Starting Your Retirement Benefits Early on the Social Security Administration's web page.


If you were born in 1960 or later . . .

You can claim full benefits at age 67.


Your eventual benefits will increase every year you delay benefits past your full retirement age until you reach 70.

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This material should be regarded as educational information on Social Security considerations and is not intended to provide specific advice. If you have questions regarding your particular situation, you should contact the Social Security Administration and/or your legal advisors.


Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

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