Deciding when to claim Social Security benefits may be one of the most complicated aspects of retirement, but it is also one of the most important.
When you start receiving benefits can have a profound impact on how much you receive for the rest of your life. Waiting to claim can add thousands of dollars to your retirement income over time, but it’s not right for everyone.
Jean L. Planning to wait until age 70 to claim your benefits. The Money Talks Newsletter client knows that waiting until age 70 will give him the largest possible monthly payment. But she is unsure whether this could have unintended consequences or a negative impact on her spouse’s benefit amount.
As Jean recently asked Money Talks News:
“Get your Money Talks News emails daily and always read them. Lots of great information and have used many.
I’ve been looking for a little advice on claiming Social Security and haven’t been able to see anything directly similar to what I’m looking for. Wondering if you can help.
My wife and I are 62 and planning to retire at 67. We are financially strong and middle class, but my plan was to receive Social Security at age 70 to make the most of it. Thinking we can live on his social security until I’m 70, while he’s painting 67. We both have over 40 years in the workforce. Our house and vehicles have been paid off.
Is there a problem with waiting 3 years before claiming Social Security even if I can’t find a part-time job? Will she be able to get my higher rate until I start taking it? Will my delay of 3 years affect what I get?”
Jean, I’m going to take your questions one by one, starting with your questions about benefits.
Is there a problem with waiting 3 years after retirement to claim Social Security?
Technically, there’s no problem with waiting three years after your retirement date to start taking Social Security. In fact, waiting until age 70 to claim is best for many people as it gives them the largest monthly payments for the rest of their lives.
The real question is whether you can afford to defer your benefits — that is, whether you’ll have enough money to make it three years without a salary or Social Security benefits. Or, if you decide to work part-time in retirement, the question is whether you can do it for three years with only part-time pay.
I can’t answer this for you without knowing the specifics of your finances. I recommend reviewing your financial needs to determine if you can wait to take advantage of your benefits.
Consider your monthly cash flow without taking out your profits. In other words, determine how much income you expect to receive from other sources each month, and how much money you expect to spend each month in retirement. Will that income be enough to cover all your expenses, including any medical costs you have?
Based on what you mentioned, you and your spouse have done more than enough to qualify for Medicare health insurance coverage when you turn 65. But Medicare doesn’t cover all medical costs, and traditional Medicare premiums typically increase every year.
The average retired family spends more than $8,000 a year on health care, and more than $5,000 of that amount are insurance-related costs.
Does waiting until age 70 to claim Social Security affect your benefits?
Delaying your benefits beyond your full retirement age – which is 67 as you say – can increase your monthly benefit payments by as much as 8% annually. So deferring benefits until age 70 could provide thousands of dollars in extra Social Security income over the rest of your life.
However, your benefit amount will not increase if you defer after age 70. In other words, waiting until age 70 gives you the largest monthly payments, but there is no benefit to waiting longer.
You can find out what your benefit amount will be if you claim at each age between ages 62 and 70 by reviewing your Social Security statement. It will also confirm whether you have enough credit to qualify for Medicare at age 65.
Create an online account at the official Social Security website Access your latest statement and other resources.
Can your spouse take benefits based on your excess amount?
As far as your spouse is concerned, if she applies for benefits when she reaches her full retirement age – which is 67 as you say – she will receive the greater of the two benefit amounts:
- His retirement benefit (which is based on his own earnings record)
- His or her spousal benefit (which is based on your earnings record – this is typically half your full retirement benefit, i.e. half the benefit amount you would have received if you had claimed at age 67)
Note that if your wife applies for benefits at full retirement age, she will have to apply for both of these amounts at the same time. It is known as deemed filed Rule.
This rule applies to everyone born after January 1, 1954, and is believed to result in applicants receiving the larger of the two benefit amounts for which they are eligible. So when your wife applies, the Social Security Administration will review both the amounts she is eligible for and pay her the higher amount from that point forward.
Unfortunately, there is no way for your wife to receive half the amount she would have received at age 70 if you wait until that age to claim.
Spouse benefits are limited to one-half of the spouse’s share. full retirement amount. Then, for your wife, it will be half the benefit amount you would have received if you claimed at age 67.