RETIREMENT, SPOUSAL, & SURVIVOR BENEFITS

Retirement Benefits

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This is your benefit based on your work history. You know, the green and white statement you receive from the Social Security Administration? It's the benefit listed on there. While you could claim your early (as early as 62), you will take a permanent reduction in your benefits. The reduction could be as much as 25%.

If you wait to elect benefits until your Full Retirement Age (FRA) there is no reduction in benefits. You receive your full Primary Insurance Amount (PIA), and any Cost Of Living Adjustment (COLA) increases to this benefit.

If you delay claiming your benefit beyond FRA you will receive an 8% annual increase to your PIA benefit until you reach age 70. There's no additional delayed credit awarded beyond age 70. Therefore it doesn't make much sense to delay claiming benefits beyond attainment of age 70.  COLA adjustments may still further increase the benefit however. 

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Spousal Benefits

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You may find it advantageous to elect a spousal benefit rather than claim your own worker benefit. Whether you are married, or were married for at least 10 years and then divorced, you are entitled to 50% of your spouse's or ex-spouse's Full Retirement Age Benefit (FRA). 

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In certain circumstances claiming a spousal benefit may be an advantageous strategy for the household. It may allow your household to receive some income from partial (spousal) benefits now, while your own worker benefit to increase. Claiming strategies known as switch strategies and timing strategies aim to increase lifetime income from Social Security by leveraging the spousal benefit. 

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Survivor Benefits

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At the death of the first member of a couple, the surviving spouse generally receives the higher of her benefit or the benefit of the deceased spouse.  If you are the higher wage earner, claiming your benefit early permanently reduces your own benefit, but it also reduces that of your surviving spouse.

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One of the most common mistake we see is this. 

A husband who is the higher wage earner, and is also a few years older than his spouse, claims benefits early because he is not sure how long he will live.  If he claims at 62, he will have reduced his wife’s survivor benefit by 17.5% relative to waiting to 66 and 44% relative to waiting to 70. 

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Keep in mind – 98% of survivors benefits are paid to women and 80% of women survive their husbands on average for 14 years.  That’s a long time to have to live on a dramatically reduced benefit. 

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Delaying your benefits just might be the most selfless act you could do for your spouse (besides purchasing more life insurance) to strive to prevent a reduction in lifestyle at your passing.