Strategies to Maximize Social Security Benefits

When and how you claim your Social Security benefits has a great impact on the monthly amount you receive.  Following are some tips for maximizing your benefits.

Get higher payments by starting later.

If you start receiving your personal benefits at full retirement age, somewhere between age 66 and 67, you will receive what is known as primary insurance amount. Start benefits at age 62, as soon as you become eligible and your monthly benefit amount will be permanently reduced. Start benefits later (up until age 70), and you will accrue delayed retirement credits for each month that you postpone the start of your personal benefits. These credits permanently increase your monthly benefit amount.

Example: For someone entitled to a $1,000 monthly benefit at a full retirement age of 66, starting at age 62 reduces the benefit to $750; waiting until age 70 increases the benefit to $1,320. So, by waiting until age 70 to begin receiving benefits, you can permanently increase the monthly benefit by as much as 32%.  With that said, you will have missed all of the payments between age 62 and 70. So, is it better to receive lower payments for a longer time or higher payments for a shorter time? In part, the answer depends on how long you live. By the time you reach the average life expectancy for someone your age, the lifetime benefits will be about the same regardless of when you started. And if you live past the average life expectancy, delaying the start of benefits will result in higher lifetime benefits.

File a restricted application.

If you have reached full retirement age and are eligible for spousal benefits and your own benefits, you can generally file a restricted application for just spousal benefits.  This will enable you to receive spousal benefits for a few years while delayed retirement credits continue to pump up the amount of your own monthly benefit, which you can switch to at age 70.

File and suspend.

This strategy may make it possible for either you or your spouse to receive spousal benefits for a few years, while both of your personal records continue to accrue delayed retirement credits.

If you have reached full retirement age, you have the option to file for your benefits and then suspend them so that delayed retirement credits continue to accrue, resulting in a higher monthly benefit when you resume benefit payments, typically at age 70.

Why bother filing in the first place if you don’t intend to start receiving benefits until age 70?

One reason is so that your spouse can file for spousal benefits, which is not possible until after you’ve filed. By filing and then suspending your benefits, your spouse can receive spousal benefits while you wait for your own benefit to increase.

Even single individuals can benefit from this strategy – Filing and suspending offers single individuals the flexibility to change their mind later on about having delayed the benefits and request a lump-sum payment back to their suspension date. Although they will give up the credits accrued while the benefits were suspended, in some circumstances (such as single and terminally ill) an immediate lump sum may be more desirable than future higher payments.

Choosing when and how to start your Social Security benefits can be a complex decision and very dependent on your unique circumstances. The strategies noted here may not be appropriate for you.  Please consult your financial advisor for advice.

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