Every single day, more than 180,000 people run to their local Social Security office to claim their well-deserved benefits. Many people bring their questions to the Social Security Administration, but what they don’t realize is the SSA’s primary job is to deliver a service, not financial planning. They often do not have the appropriate insights or information to help you make such a personal decision.
Deciding when and how to accept your Social Security benefits is a huge decision that impacts the rest of your life. People are living longer, healthier lives, and no matter how much you have planned, there are certain aspects that some just don’t think about until it is too late.
My Social Security office never told me about …
From little-known rules to specific strategies for claiming benefits, there are plenty of things the SSA doesn’t have the time to tell you nor can they tell you.
One thing to consider when claiming your benefits is when to elect to do so. While retiring at 62 — the earliest possible date for most people — might have an allure for some people, doing so locks you, and potentially your spouse as well, into less benefits. If you are married, and do elect to claim your benefits before full retirement age, you could lock your spouse into low survivor benefits when you die. The longer you wait to claim (after 65 and up to age 70), the more your benefits increase (8 percent per year).
Once you reach retirement age, you also can claim your benefit and suspend it. This allows for spouses over the age of 62 to begin collecting spousal benefits, and allows your own benefits to increase (delayed retirement credits).
Brown Smith Wallace recently worked with a husband and wife getting ready to claim their Social Security. He was a physician and she worked in an office, and the disparity between their benefits was significant. While they were both very knowledgeable and financially sophisticated, the clerical administrators at the Social Security office were unable to explain all options available to them in a way that made sense. They were initially entitled to claim $757,483 of lifetime benefits, but after speaking with their adviser and implementing the claim and suspend strategy, their total benefit increased to $875,280 — a lifetime benefit increase of over $100,000.
Divorces and deaths also are worth discussing. Ex-spouses could be eligible for benefits on former spouse’s earnings, not to mention widows and widowers being eligible for Social Security checks as a survivor.
If you have been proactive and contributed to your savings accounts (401 (k), individual retirement accounts, etc.) then you could delay claiming your benefits until later, giving them the chance to increase. Since Social Security benefits are taxable, it would make sense to use your savings earlier in your retirement years to pay bills and support yourself, until you’re ready to claim benefits. This will make your withdrawals from savings smaller later in life, due to your larger benefits.
Forming your claiming strategy
Approach an adviser who can walk through your financial and personal history, so they can help you make the best decision for your and your spouse’s futures. Social Security is a great resource that will get you through your golden years, but the appropriate planning will ensure you are comfortable!
Click here for help in forming your Social Security claiming strategy. Or contact Roy Kramer, Tax Partner and National Social Security Administrator, at 314.983.1265 or firstname.lastname@example.org.