Social Security is a lot more challenging for married couples than making a comment to your spouse, “I’m 62 this year and I can get Social Security. Seems like a good idea. I’m tired of working.”
Instead, you need careful planning. The longer you wait, and the more carefully you calculate, and take full advantage of the complex rules, the better you will do for yourself and your spouse. The happy result can be many thousands more dollars in benefits during your lifetime. The longer you can wait to collect your retirement benefits, the more money you will receive. And you can have income security into very old age. Take a 65 year-old married couple. There is a 40% chance that one of them will celebrate a 90th birthday.
You can file for Social Security benefits as early as age 62, but this will mean a permanently reduced benefit. You get 25% less than you would by waiting till 66, which is officially the age for full benefits. But there is a potential bonus; you get 8% a year extra for each year you delay taking benefits between 66 and 70. That means 32% more for waiting until age 70. You don’t have to work during those four years.
How It Works
Take the case of Olivia and Ernesto. At age 66, Ernesto is entitled to his full benefit of $1,800 a month. Olivia is 64. The maximum spousal benefits is 50%, or $900 a month. But Olivia must wait until till age 66, her own age of full retirement, to get the maximum spousal benefit. If she files now, at 64, she gets a permanently reduced payment.
She should wait, assuming they have other financial assets to draw upon.
Ernesto want to delay, too, because at age 70, he will get $2,376 a month (remember that bonus of 8% a year).
Here is what they do. Olivia waits till she reaches age 66, and they visit the local Social Security office. Olivia files for spousal benefits, which means she is entitled to $900 a month, or 50% of Ernesto’s full benefit. He has not been collecting yet. Ernesto, who is now 68, FILES and SUSPENDS, which means he is going on record to file for benefits, but he will not collect them until age 70.
Olivia immediately begins drawing $900 a month. Two years later, when Ernesto is 70, he begins collecting the benefit of $2,376 a month. The couple’s total Social Security income is $3,276 a month.
They have maximized their family benefit.
Your Decision: Does it Pay to Wait?
How does this apply to you? If you have the financial resources to delay taking Social Security, and you are in good health it, pays to wait. Age 81 is the approximate cross-over point in deciding whether to wait till 70 to get the bonus payments. Remember you are giving up four years of benefits, since age 66 is when you can collect the full benefit. After age 81, you will have recouped those benefits and you will be getting more money for the rest of your life. If people in your family usually make it to age 81, and you are in good health, it pays to wait.
The Social Security Administration’s actuarial tables say that waiting is a good bet.
For a man, aged 62, life expectancy is 81.4 years. For a woman, aged 62, life expectancy is 84.3 years.
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