When Should I Begin Collecting Social Security Retirement Benefits?
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For many Americans, when to begin collecting Social Security retirement benefits is the $64,000 question — only that number may greatly understate the amount of money that rides on your decision. Depending on how long you live, differences in when you start benefits can easily add up to six figures over time.
So, what makes sense for you? Here are some questions you should consider to help decide when it’s best to claim Social Security:
How much income do you need in retirement? Planners often say you need between 70 percent and 85 percent of your pre-retirement income to maintain your standard of living when your working days are over. Some people can get by with less, and some need more to pay for the lifestyle they desire. You also can get a hint by plugging some numbers into online calculators and see what pops out. (One such tool is available at www.aarp.org/work/retirement-planning/retirement_calculator.) How close will your retirement income, including Social Security, bring you to the level you need? Remember: Your Social Security benefit will be higher the longer you wait to claim it, up to age 70. Think through your needs carefully before you start to collect.
Can you afford to wait? Most people claim benefits within the first few years of eligibility. But in doing so, they lock in a smaller monthly payment for the rest of their lives. Claiming earlier also may lock in a smaller monthly payment for your spouse, if you die. Given increases in longevity — which could mean you and your spouse depend on Social Security for many years — you should consider the upside of waiting for a larger benefit if you can afford to.
Can you use a marital strategy to maximize lifetime benefits for your household? Married couples may have options that singles don’t. For example, when the breadwinner reaches 66 (or 67, if born in 1960 or later), he or she can file for benefits but suspend claiming them. This allows a spouse who is 62 or older to claim a spousal benefit, while the breadwinner’s unclaimed benefit grows significantly.
How long will you live? That’s a mystery for most people, but you may have clues — and chances are, it could be a very long time. If you survive into your 80s and beyond, it can make sense to avoid starting benefits early. (If you anticipate a shorter life span, it may make sense to start them sooner.) How’s your health? What’s the experience in your family? Online longevity calculators such as www.livingto100.com and www.bluezones.com (for bluezones.com, click on “Live Longer” and then “Vitality Compass”) can give you a general estimate of how long you can expect to live.
Because you can’t be sure how long you’ll live, what makes you feel more secure: a smaller benefit sooner or a bigger benefit later? If you wait to claim but die early, you end up with less in total than if you claimed sooner. If you claim early and live longer (generally into your 80s and beyond), you end up with less in total than if you claimed later.
How important is the survivor benefit you leave behind? A surviving spouse who has reached full retirement age may receive 100 percent of your retirement benefit. The difference in when you start (as well as the age when your spouse claims) can come to many thousands of dollars in the lifetime of your widow or widower.
There is no perfect answer to the question of when you should start collecting retirement benefits, but by considering these questions, you stand a better chance of making a decision you’ll be happy with.