When should I start collecting SS benefits?
This is the million dollar question, and it is different for every person. Basically, you have three main options:
- Collect benefits early. You can start collecting Social Security benefits as early as 62 years of age. However, you will receive about 30% less in income than you will get at full retirement age, which is 66 for most of us.
- Start collecting at your full retirement age (FRA), and receive 100% of your benefit (Primary Insurance Amount). This option is most often used but adding years before retirement is not always easy. Also, there are other variables to consider.
- Delay benefits until age 70 and you will receive 32% more income for life. Plus, waiting until 70 could result in a surviving spouse receiving quite a bit more income from Social Security.
- There are several online calculators that are very useful in helping you figure out the best options for you to begin benefits. The Open Social Security calculator is free and easy to use.
Should you start collecting early or wait?
Longevity plays a key role in determining which filing strategy may be more advantageous for you. Depending on how long you live—and we are all living longer today than our parents—you could potentially receive more in lifetime benefits by waiting until you are 70 to start benefits. The average life expectancy is now 83 for a 65 year old male and 85 for a 65 year old female. One thing for sure, unless you absolutely need the income, enrolling in benefits before your FRA is not a good idea. Collecting Social Security checks at 62 means you will receive 30% less in benefits than waiting for full retirement age, if you live to be age 85 that means thousands of dollars lost as compared to waiting.
Recent Changes to Social Security Rules
The Bipartisan Budget Act of 2015 made some changes to Social Security’s laws about claiming retirement and spousal benefits. Section 831 of the law (entitled “Closure of Unintended Loopholes”) made several changes to the Social Security Act and closed two complex loopholes that were used primarily by married couples.
What was the loophole? As described above, retirement benefits grow for each month you delay claiming, between full retirement age (currently 66) and 70. A loophole allowed a worker at full retirement age or older to apply for retirement benefits and then voluntarily suspend payment of those retirement benefits, which allowed a spousal benefit to be paid to his or her spouse while the worker was not collecting retirement benefits. The worker would then restart his or her retirement benefits later, for example at age 70, with an increase for every month retirement benefits were suspended.
How is the law changing? Under the new law, you can still voluntarily suspend benefit payments at your full retirement age (currently 66) in order to earn higher benefits for delaying. But during a voluntary suspension, other benefits payable on your record, such as benefits to your spouse, are also suspended. And, if you have suspended your benefits, you cannot continue receiving other benefits (such as spousal benefits) on another person’s record.
Spousal benefits and the “file-and-suspend” strategy
If you are married, you are generally eligible to claim the greater of your own benefits or up to 50% of your spouse’s full benefit.
The spousal benefit is based on our spouse’s benefit at his or her full retirement age. If your spouse waits past the FRA to collect spousal benefits the amounts do not increase the amount of spousal benefit. However, you cannot collect on your spouse’s record until your spouse files for benefits. Therefore, if you are waiting to collect your benefits at age 70 and your spouse wants to claim spousal benefits, he or she cannot enroll until you have filed for benefits.
Can I still file a restricted application?
To explain let’s use the following example: Sam is 67 and his wife is 66 at (Full Retirement Age) FRA. Sam has elected to wait until 70 to start his Social Security benefits but his wife can enroll at her FRA and start collecting her full benefits. Sam can elect his spousal benefit and collect 50% of his wife’s monthly benefit until he is 70, and then switches to his individual full Social Security benefit. The end result is Sam collected Social Security for three years prior to turning 70 at which time he can collect the higher amount.
The new law prevents people born after 1/1/1954 from doing so, but since Sam was born before that date, he can still restrict his application to just his spousal benefit once his wife reaches her FRA. You, of course, still can’t do this before FRA, but it’s still an option for you at or after your FRA.
Applying for Social Security
If you’re approaching retirement age, you may have some idea of when you’d like to start receiving Social Security benefits. However, you may not know how the application process works or when you need to apply in order to start receiving benefits at a specific time. Here’s what you need to know about how to apply for Social Security, what information you’ll need to gather, and when to fill out the application.
Three ways to apply
When it comes time to apply for Social Security retirement benefits, you have three options.
- You can use the Social Security Administration’s online enrollment process, which should take no more than 30 minutes as long as you’ve gathered all of the required information and documentation (more on that in a bit).
- You can also choose to apply by phone.
- Enroll at your local Social Security office if you’d rather have someone there to assist with the process. Whichever method you feel most comfortable using, your application will be reviewed and processed as soon as all necessary documentation and information is received. And, the Social Security Administration will notify you if it turns out you could qualify for higher benefits on your spouse’s record, or if other family members can receive benefits on your work record.
When should you apply?
In order to apply for Social Security benefits, you need to be at least 61 years and nine months old, but you won’t begin receiving benefits until you turn 62. Once you’ve reached the minimum age of eligibility (62), you should be able to apply and start your benefits in the same month, so you really don’t need to rush and apply early unless you foresee any delays with documentation or have special circumstances. In general, the Social Security Administration says that you should apply for benefits no more than four months before the date you want your benefits to start.
Bear in mind that Social Security benefits are paid in the month after they are due. So, if you start your benefits on your 62nd birthday, you won’t start receiving payments until the following month.
Additionally, if you don’t need your Social Security benefits right way, you don’t have to do anything in order to increase your monthly disbursements down the road.
Finally, it’s also worth noting that even if you decide to wait to claim Social Security benefits, you should still fill out the benefit application to apply for Medicare three months before you turn 65. Delaying your application for Medicare can result in higher premiums, so it’s important to do it as soon as possible. Even if you choose not to sign up for Social Security, Medicare is still available and, if nothing else, apply for Part A, as it is free.
What information will you need to supply to sign up for SS?
In order to apply for Social Security benefits, you’ll need to be able to document some information about your identity and work history. Specifically, before applying you should have the following information handy:
- Your date and place of birth (which you need to document with an original birth certificate)
- Your Social Security number
- Your spouse’s Social Security number and date of birth
- Place of marriage
- Date of divorce or death of your spouse, if applicable
- Names of your unmarried children under 18
- Your bank account information if you want your benefits directly deposited
- The name and address of your employers from this and last year
- The amount of money you earned last year, this year, and your estimated earnings next year (if any)
- A copy of last year’s W-2 or self-employment tax return
- Your earnings record (a copy of your Social Security statement has this information)
- Records of any active duty military service before 1968 (documented with a copy of your military service papers)
If you use the online or phone application, you’ll be given a list of required documents, as well as instructions of how to submit them.
This is not an exhaustive list, and there are many special circumstances that will require additional documentation. For example, if you have used a different Social Security number at any point in your life, you’ll need to document this change.
For more information about Social Security or Medicare contact Bob Garrison at bob@argarrison.com or call 940-382-4700