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The Right Time to
Collect Social Security

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The following information can be complex, and you should consult an expert about this topic.

Just because you are no longer in the work force doesn't mean you should immediately claim Social Security. Yet many retirees do just that–and possibly end up short-changing themselves. You are eligible to receive your full benefit when you attain your full retirement age (generally age 66 or 67, depending on when you were born). If you decide to start taking Social Security before you reach your full retirement age, your monthly benefit will be reduced. Likewise, if you start your Social Security benefit after your full retirement age, your monthly benefit will be increased to take into account the delay in payments. In other words, the longer you delay claiming Social Security, the larger your monthly benefit will likely be. Keep in mind there are no benefit increases after you reach age 70. Is delaying a smart decision? Maybe. Let's take a look at some scenarios to see how delaying Social Security can benefit some people.

Filing for One

Figuring out when to claim Social Security is fairly straightforward if you are single. You can claim benefits as early as age 62 or as late as age 70.

If you begin taking your benefit at age 62, depending on when you were born, it will be approximately 20 to 30 percent less than what your full benefit would have been at your full retirement age (generally, 66 or 67, depending on when you were born). For more details, see the Table on Benefit Reduction for Early Retirement.

If, however, you wait to begin collecting your benefit until after you reach your full retirement age, your benefit will be increased. The amount of increase depends on the number of months you delay. It is important to note that there are no benefit increases after you reach age 70. If you work and you begin receiving benefits early, your Social Security benefit will be reduced if you exceed the annual limit on earnings. Also, your benefits may be taxed if you receive Social Security income and have earned income. However, the amount your benefits are reduced isn't truly lost. Your benefits will increase at full retirement age to account for the benefit reduction while working. Up to 85% of your Social Security may be subject to income tax if your income is higher than certain thresholds. You may want to consult a tax advisor before you apply for Social Security or start earning income.

Other factors to consider include your health and personal savings. Keep in mind that if you delay Social Security until your full retirement age or later but die early, you will likely have received benefits for a shorter period of time than if you had started them before your full retirement age. But, if you delay Social Security and live into your 80s, it could be a smart decision because you will collect a larger monthly check for a number of years that will compensate for those initial years when you didn't receive benefits. Your own personal health and family longevity are factors to consider before making this decision. For additional information on this and other aspects of Social Security, go to www.ssa.gov

Married: Weighing the Rules

What if you are married? Suddenly, the choice gets more complicated. As you and your spouse weigh when to claim benefits, you may want to consider four additional rules:

  • You can receive benefits based on your own earnings record or you can receive a spousal benefit based on your husband or wife's earnings record. The spousal benefit can be as much as 50 percent of the other spouse's benefit as of full retirement age. For spouses with relatively modest lifetime earnings, the spousal benefit may be worth more than the benefit they qualify for based on their own earnings record.
  • For your spouse to receive benefits based on your earnings record, you must first claim your benefits. But even if you claim your benefits, your husband or wife doesn't necessarily have to claim Social Security right away.
  • If your husband or wife delays taking Social Security, that will increase his or her spousal benefit–up to a point. Your husband or wife could increase his or her spousal benefit by delaying benefits from 62 until full retirement age (generally age 66 to 67, depending on the year your spouse was born). But if your spouse waits until after full retirement age to claim spousal benefits, his or her monthly check won't increase any further, except for any adjustments for inflation.
  • If you were the family's main breadwinner and you delay benefits–including delaying beyond your full retirement age–you will increase not only your own benefit, but also the survivor benefit that your husband or wife may receive, assuming you predecease him or her.

Married: Making the Choice

What are the implications of all this? If you and your spouse are both in poor health or family history suggests longevity isn't on your side, you may both want to claim Social Security earlier. You might also want to claim benefits early if you have children under the age of 19 because you may also be able to claim family benefits. The rules are different if you have one or more disabled children, so you should review them when deciding when to begin your benefit. To learn more about family benefits, go to www.ssa.gov

If you don't have children under the age of 19 (or a disabled child) and there is a reasonable chance that you or your spouse could live into your 80s, the decision gets trickier. One possible strategy: the spouse with lower lifetime earnings might claim benefits at 62 based on his or her own earnings record, while the higher-earning spouse postpones benefits.

Why postpone benefits if you were the higher-earning spouse? If you delay, you will boost both your benefit and also the survivor benefit that is potentially payable to your spouse should you die before them.

Problem is, if you don't claim benefits, your spouse may be able to get benefits based on his or her own earnings record-but they won't get spousal benefits, which could be even more valuable. Keep in mind that, because of the survivor benefit, it may make sense for you to delay benefits, even if your health isn't good. In essence, if you are married and you were the family's main breadwinner, your Social Security benefit could live on after your death–and you may want to postpone benefits for the sake of your spouse.

Your Next Steps

Deciding when to begin your Social Security benefits is complicated and you need to take into consideration a number of factors, including but not limited to: your financial situation, your health and the health of your spouse, and what you plan to do during your retirement years. You can find more information about Social Security benefits by visiting the Social Security website at www.ssa.gov. Speak with your financial advisor to compare your options and how it will affect your overall retirement plan.

To get a quick initial projection on your Social Security income, try out the Citi Personal Wealth Management Social Security planning tool.