Are you thinking about retiring and collecting your Social Security benefits? This can be a very confusing and complicated endeavor to say the least. I recently came across an interesting interview on www.morningstar.com about this very subject. It was a very informative brief interview with the author of Get What’s Yours by Phil Moeller who was the co-author of the book. What follows will be a brief overview and some comments on the article’s interview.
In the book, they discuss the three ways to maximize your benefits. The first is the most important is to be patient and be informed about the consequences of making early decisions. Most people file for their benefits when they reach the age of 62 or close to it, which is the earliest someone can claim for their benefits. But doing so will decrease someone’s lifetime benefit anywhere from about 25% to 30% depending on their Social Security defined full retirement age. And for those who elect to retire at age 70 they will see an increase of over 70% of the monthly benefit from those who elect to not wait. And that increase is for the lifetime of the recipient.
Now there are many instances where it is not to someone’s advantage to wait until their full retirement age much less age 70. In one instance being spousal benefits, there are no advantages to waiting after your spouse has reached their full retirement age. In other cases, a person’s health may make it beneficial for them to take benefits when the need arises for additional cash flow. Also, if you have a family history of illnesses or have a reason you will not have a longer life than what many expect it makes sense to elect to receive your benefits early. In these cases, they are unique to the individual and must be considered by that person and their family.
One instance where it does not always make sense to defer benefits is if you are past the age of 62 and have minor children who would also be eligible for benefits under your filing. In this instance if you waited until your full retirement age or at age 70 you would lose out on your children’s benefits as they may not be school aged when you do file. So in this instance it does indeed make sense to see about filing for your benefits early so your children can benefits from your Social Security benefits as well.
Now in the vast majority of cases there is no logical benefit to waiting past age 70 to elect for your benefit payments. Some people say that they fear higher taxes but do not let that be a reason for not getting your payments. There is no financial advantage to waiting past age 70 as that is where the additional funding stops and never let taxes be a reason for not receiving the payments after age 70. There are no advantages to delaying benefits past the age of 70 at all.
And there are many other different types of benefits associated with Social Security besides your own, your spouses and possible your children’s. Some are survivor benefits and ex-spousal benefits. The one that most interests married couples is the spousal benefit. Here things can get a little tricky, and you may want to consult a professional. If you were to elect to collect your benefits at your full retirement age but continue to work you can file and then suspend the payments so your spouse will get the spousal benefits. But your spouse will only get the higher of her benefits or the spousal benefits. Then after you die, they will receive the higher of their benefits or their survivor benefits but not both. At some point Congress may close this loophole and stop allowing people to file and suspend as many see it as a rich person’s tactic as most working Americans do not have the desire to work to age 70 or the funds saved to not collect their benefits.
Then the third aspect that was examined was that if timing. This goes hand in hand with being patient when deciding to elect to collect your benefits. Most of us have full retirement ages between 66 and 67 now provided Congress does not go and change this in the future. Now for many working to age 67 is not an issue and for some working to age 70 may not be a problem either. But by electing an early retirement you stand to lose a lot of your benefits for life. Or by electing to defer your benefits you can see a substantial lifetime increase in those same benefits. Timing is key, and you need to prepare for your election of the benefits you will receive for the rest of your retirement.
The book is very comprehensive and covers many more topics than the ones I outlined in this post. I highly recommend anyone who is thinking of their Social Security situation to consider picking up a copy of Get What’s Yours now.
If you have any questions or need further information on Social Security feel free to contact me.
