Determining the right time to begin collecting Social Security can seem like aiming at a moving target. There are factors to consider such as health, marital status, and current income. There is no “right” time to begin collecting benefits, but there are considerations to collecting earlier or later.

The decision that will have the largest impact on your Social Security benefits is the age at which you begin collecting. This choice will dictate your annual Social Security income for the rest of your life. More than half of retirees begin to collect benefits early, or before full retirement age. By collecting early, beneficiaries will experience a reduction of benefits by 8% annually resulting in a total permanent reduction of benefits between 25-30%. If recipients begin collecting at their full retirement age, they will collect 100% of their benefits, which will be adjusted for expected longevity and inflation. The maximum benefit is gained by delaying Social Security benefit collection until age 70.

Types of claims:

Single: A person who is entitled to only his or her own worker benefit. The individual must consider personal health and anticipated longevity, along with need for benefits. This type of claim may be maximized by deferring collection until age 70. The cumulative benefits received by a single recipient who begins to collect at age 70 will be larger than those of a single recipient who begins to collect Social Security benefits at age 62 or age 66.

Spousal (single income household): The spouse of a wage earner qualifies for spousal benefits (amounting to 50% of the wage earner’s benefits) who has been married for at least one year or the parent of the wage earner’s child. In order to collect spousal benefits, the wage earner must have also filed for Social Security benefits. There is a significant benefit to waiting until full retirement age or later, but the spouse can file before full retirement age without causing the wage earner’s benefits to be reduced.

Spousal (dual income household): In a dual income household, the spouse who earns a lower wage may elect to collect spousal benefits (amounting to 50% of the wage earner’s benefits) that result in higher benefits than they would have otherwise received. Again, the higher wage earning spouse must have filed for benefits in order for the spousal benefit recipient to begin collecting. The spouse may collect before full retirement age without causing the wage earner’s benefits to be reduced.

Divorced: An ex-spouse may receive spousal age benefits if the marriage lasted at least ten years. The ex-spouse may collect as early as age 62 (collections will be subject to age based reductions or credits), and this decision will have no impact upon the benefit paid to the wage earner. In order to qualify for spousal benefit as a divorcee, the ex-spouse must be unmarried at the time of filing for benefits. If the spousal beneficiary does re-marry, the benefits will be suspended until the new marriage ends by divorce, death, or annulment.

Survivors: A widower may collect the full amount of benefits that his or her spouse would have received. Collections begin as early as age 60, or age 50 if the survivor is disabled. In order to qualify, the marriage must have been intact for at least 9 months before death or 10 years if the marriage had ended in divorce. When filing for survivor benefits the recipient must be unmarried, but may continue to receive survivor benefits if they re-marry after receiving benefits. A unique component of survivor benefits is that the recipient may elect to receive benefits based upon his or her own wage earning contributions after age 62, even after collecting survivor benefits. If the widower delays collecting own benefits until after full retirement age, he or she will earn the age based delayed retirement credits.

Choosing when and how to file for Social Security benefits can be confusing, and it is important to consider all factors when making your decision, and perhaps the biggest factor is how your social security income is matched by your other retirement and non-retirement investments.

Call Rochester Investments at 585-568-6656 to discuss your options, and learn more about how to maximize your benefits.