3 Important Considerations for Deciding When to Claim Social Security

(Adam Levy)

Before you apply for your Social Security retirement benefits, consider a few factors. Although you can start receiving Social Security checks at age 62, you may be able to get more money from the government program if you delay until age 70.

Here are three big factors to consider when deciding when to claim Social Security benefits.

1. Your health

Social Security will increase your monthly benefit each year you are late, but then you will receive benefits for one less year. Delayed retirement credits are made in such a way that you will end up receiving approximately the same total amount if you live the average life expectancy.

However, if you have reason to believe that you will die before the average age, that would weigh heavily in favor of claiming early. On the other hand, if you have no reason to believe that he will die relatively soon, it can often be to your advantage to delay it as long as you can. Delaying Social Security is like buying insurance to live longer than expected.

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2. Your spouse

Spouses have the option of claiming their own benefit or up to half of their partner’s benefit. It is important to note that the spouse can only claim their partner’s benefit if her partner has already filed for himself. In addition, spousal benefits do not accrue delayed retirement credits beyond full retirement age.

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If you earned significantly less than your spouse during your working career, there is limited value in delaying your claim beyond your full retirement age. Even if your spouse is younger and won’t be able to claim her spousal benefit until you file, she won’t collect her own Social Security benefit long enough to benefit from the delay. So, all things being equal, claiming at full retirement age is usually best.

If your spouse is older than you, it might make sense to claim even earlier and start collecting reduced spousal benefits. If your spouse predeceases you, you can switch to a survivor benefit, which gives you 100% of your spouse’s benefit at full retirement age.

If your spouse earned significantly less than you and will receive spousal benefits, the timing of your claim affects when you can claim. Often, delaying Social Security benefits for the person who earns the most money makes the most sense. But if the difference your spouse will collect in benefits is significant enough, you may want to start collecting your benefits sooner so they can be switched. This would certainly be the case where your spouse did not work long enough to be eligible for Social Security and relies entirely on spousal benefits.

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Couples should plan their Social Security strategies together, taking into account their age and health.

3. Other assets

If you have a lot of assets in multiple accounts, you may benefit from delaying Social Security. Not only will you get delayed retirement credits, but you’ll have a few years without any earned income to position yourself to minimize your taxes. Your mid to late 60s may be an opportune time to do a Roth conversion or take some capital gains in your brokerage account.

On the other hand, if you rely on Social Security to cover a large portion of your living expenses, you may not need to do much tax planning. You may benefit from taking your Social Security sooner to make sure you don’t use up all of your other assets.

That said, investors delaying Social Security shouldn’t fear a slightly higher rate of withdrawal from their pre-retirement portfolio. The burden on your wallet will lessen once you start cashing Social Security checks each month.

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By taking into account the expected value of your Social Security benefits in your portfolio, adjusting for your own life expectancy as well as your spouse’s claim strategy, you should be able to find an excellent approach for when to apply for benefits.

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