Wouldn’t it be nice if making decisions about Social Security were simple and easy? We think so.
But unfortunately, Social Security decisions are almost never easy. The decisions you make about Social Security depend on a number of factors unique to your situation, so the options your brother takes are not necessarily the best options for you.
Nevertheless, it is helpful to consider some basic scenarios that many people face when thinking about Social Security options. Below, we describe three of these considerations:
- When to start taking benefits
- Spousal strategies
- Determining what kind of benefits you are eligible for
When Should I Take Social Security?
One of the most fundamental questions to answer is the age you will begin taking benefits. The SSA will pay your full Social Security benefit at your full retirement age. Your full retirement age varies based on the year you were born, but falls somewhere between 66 and 67 for those in the baby boomer generation. (1)
The good news is, you do not have to wait until your full retirement age to begin taking Social Security benefits. In fact, you can begin taking benefits as early as age 62, but the monthly amount will be reduced to account for the extra number of years you receive benefits. You can also delay your benefits until you reach age 70, in which the monthly amount would increase each year you delay. So which is right for you?
In simple terms, here are 3 scenarios you might find yourself deciding between:
- If you are able to work and truly enjoy working, work until age 70 to maximize your benefits.
- If your health is failing or you are unable to work, retire at age 62 but receive lower benefits.
- If you have some years left in you but you do not want to work forever, try to make it to age 66 to receive your full benefit.
Keep in mind that these scenarios are simplified. Your actual scenario may be much more complex and depend on a variety of factors in your life, such as your life expectancy, goals for retirement, and other income sources.
How Do I Optimize Spousal Benefits?
Spousal benefits allow your spouse to receive a percentage of Social Security benefits based on your working record rather than their own. These benefits are beneficial if your spouse never worked, worked part-time, or made significantly less than you. If you are still married to your spouse, they cannot begin collecting spousal benefits until you have filed for benefits yourself.
If you start taking benefits early, your spousal benefits may be permanently reduced. But your spousal benefits will never exceed 50% of the benefit you would receive at full retirement age, so it would not make sense for your spouse to postpone taking benefits past your full retirement age if you are also claiming benefits then. It is important to note that ex-spouses are eligible for spousal and survivor benefits if the marriage lasted at least 10 years.
What Kind Of Benefits Am I Eligible For?
In addition to retirement and spousal benefits, the SSA offers survivor benefits, child benefits, and disability benefits. Survivor benefits pay up to 100% of a deceased person’s benefit to a spouse or surviving dependent child. Additionally, children under the age of 18 (or under the age of 19 if full-time high school student) may be eligible for a percentage of your benefits if they are unmarried and still living in your home.
The SSA will not reach out to you if you are eligible for these benefits. You have to know they exist so you can take the steps to start receiving benefits you are entitled to. However, taking Social Security benefits of any kind can come with significant restrictions or unwanted consequences, especially regarding taxes. It is up to you to know what restrictions will apply and what consequences you may face in other financial aspects of your life.
We Can Help You Weigh Your Options
When it comes to Social Security, you have a lot to consider. And if you do not make the correct decisions for your unique situation, you could end up missing out on benefits you are entitled to or paying unnecessary taxes because you have not structured your benefits and other income properly.
That is why you need to partner with a team of experts. At Frazie Wealth Management, we help you make these important Social Security decisions to align with the rest of your financial goals and plans. Request your free 60-minute listening session today to see how we can help.
