Resolution #5: Learn your Social Security options
For the past few months, we’ve shared several Weekly Wires that touch on different retirement-related “resolutions” you should try to set this year.
This month’s resolution should be particularly important to you, as it directly affects your retirement income.
Many people don’t realize that there are ways to maximize your Social Security benefits. In other words, you may have the ability to increase your post-retirement income. Your next resolution, then, should be to learn about the different options for maximizing your benefits, and then decide which option makes the most sense for you.
Here are three of the most important options:
Option #1: Delay collecting your benefits
Too many people rush to collect their Social Security benefits as soon as they retire. This is sometimes a mistake, especially if you retire early. Technically, you can begin receiving benefits as early as age 62, but if you do so, your benefits will be reduced significantly. For example, if you were born between 1943 and 1954, your payouts would be reduced by 25%.1 And the reduction isn’t temporary. It’s permanent.
Waiting till your “full retirement age” could be a better option—it means you won’t face any reduction. What is your “full retirement age?” It’s the age at which a person may first become entitled to “full” or “unreduced” retirement benefits.1 The chart on the next page gives you the specifics:
|Year of Birth||Full Retirement Age|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 and later||67|
The latest you can begin collecting benefits is at age 70, and there’s good reason to hold off until then if you can afford it. Benefit payments go up 8% for every year you wait after you reach your full retirement age up to age 70. In other words, the longer you can keep your hand out of the cookie jar, the more sweets you’ll eventually receive.
Option #2: Claim spousal benefits
Another way to potentially maximize your Social Security is to claim a spousal benefit. Married individuals can claim Social Security based on either their personal earnings record (in other words, their own work history) or on their spouse’s earnings record. If a married individual chooses the latter, they would receive up to 50% of their spouse’s benefit.
Why would you choose to claim benefits based on 50% of your spouse’s earnings record rather than your own? It’s simple: because you may be able to claim whichever number is higher. Be aware, however, that you cannot claim a spousal benefit until your spouse has filed their own claim.
Option #3: Claim survivor benefits
Imagine a hypothetical couple, John and Mary. Let’s say that both claimed Social Security based on their own earnings records. Now let’s say that John dies of a heart attack, leaving Mary behind. Under certain circumstances, Mary can file to receive John’s benefit, or increase her own benefit to the same amount that John enjoyed, if John’s number is greater.
Of course, there are other ways to potentially maximize your Social Security benefits. The point is that you need to start educating yourself on your options now – because choosing the right option can have a significant impact on your retirement income!
Our financial planner, Cory Laird, conducts an informative seminar that covers the basics of Social Security and reveals innovative startegies for maximizing benefits. Our next seminar is scheduled for Tuesday, May 23rd. It begins at 5:30PM and takes place in our office. If you’re interested in attending the seminar or if you would prefer to schedule an appointment with Cory for a Social Security analysis, please call us 518-499-4565. We would be happy to provide any insight that we can.
1 “Retirement Planner: Benefits By Year of Birth,” Social Security Administration, accessed May 2, 2017. http://www.socialsecurity.gov/retire2/agereduction.htm