Congress has cut back some of the loopholes married couples once used to enhance their lifetime household Social Security benefits, restricting it to a dwindling pool of near-retirees. But that doesn’t mean claiming your Social Security benefits is a no-brainer.
By understanding how Social Security benefits and spousal benefits are calculated, you can make an informed decision when retirement comes. The Social Security Administration itself says there’s no “best age” to file, just the age that fits your retirement goals.
A few things to consider, and some links to Social Security’s helpful website:
When you file matters: Social Security largely bases your check on a couple of things: your highest 35 years of wages and your current age. Claim when you are first eligible at 62, and you’ll receive a substantially smaller monthly check than if you had waited until your full retirement age (determined by your birth year).
Working and benefits: If you’re going to keep working while you’re collecting benefits, you may want to consider the effect wages will have on your monthly check. For those who claim before their full retirement age, Social Security reduces the benefits after a certain level of annual wages ($17,040 in 2018, or $45,360 the year you reach full retirement age). If you don’t need the money and plan to work to your full retirement age, you might want to reconsider your decision to claim.
Pension effect: If you worked a while for an employer who provided a pension and you didn’t pay into Social Security (think government jobs), you may see some Social Security benefits cut back through the Windfall Elimination Provision – something to be aware of so you’re not surprised later.
Spousal benefits: Married couples who earned vastly different incomes during their lives (say a high earner and a stay-at-home parent) may benefit from the ability for the lower-paid spouse to claim on the higher-earner’s record. This can work even if the couple divorced (after at least 10 years of marriage).
The remaining strategy: For couples born before 1954, it could make sense for the lower-earning spouse to claim against the higher earner’s record at full retirement age, then switch to his or her own benefit at 70, when annual enhancements will have increased that benefit. A financial professional or Social Security’s website can help you understand if this could help you.
Did any of these Social Security facts change your thoughts about when to claim? Any surprises you’ve come across along the way? Share them with our community.
For more information, you may want to ask a financial professional, download Transamerica’s free informational kit, a Field Guide to Social Security, or visit Social Security’s helpful site at SSA.gov.