Do you know how much social security funds you will receive throughout your life? Many individuals in their early 60s considering when to begin taking their social security tend to lean towards starting sooner rather than later. Even though many understand that waiting until the age of 70 means a more considerable monthly benefit, it might appear to be insignificant enough of a bump up to deter giving up the payments between the ages of 62 and 70. There are many social security questions to consider as you approach retirement age.
When Should I Start Taking Social Security Benefits
As a fiduciary financial advisor, I encourage individuals faced with this decision to look at it within the scope of their lifetime benefits throughout both spouses' life expectancies.
Consider John and Barbara, a hypothetical married couple with primary insurance amounts (PIAs) of $3,000 and $1,800, along with life expectancies of 85 and 95. Their lifetime benefits could fall within the range of 1.7 million to 2.4 million dollars, all dependent on when they decide to begin taking their benefit payments.
It's common for people to be unaware of this variance affected by claiming earlier rather than later. That makes this question important for our clients in this age bracket and certainly something we discuss as we dive into their retirement plans together.
How Much Does My Spouse Receive if I Pass Away?
Plenty of people are aware that their surviving spouses will receive some benefit from Social Security, but many people are not exactly sure of the details. The most crucial point to remember is that if you are a higher-earning spouse, you can secure a higher benefit for your surviving spouse if you wait to claim until age 70. Understanding how to claim Social Security strategically and retirement distribution planning can maximize your household's lifetime benefits.
For example, if we look at John and Barbara again: if John passed away at age 85 and retired at 62, Barbara's monthly social security benefit would be $3,535. However, if he had waited to claim benefits until age 70, Barbara would be looking at a whopping $6,103 monthly benefit.
That's a significant disparity. Even if Barbara, the lower-earning spouse, passed away before John, John would still have maximized his benefit for himself. By having John wait until age 70 to claim, he has maximized the greater benefit for the couple over his lifetime.
What happens if I work until my 70s? Or Stop Working in my 50s?
Many people do not realize that the benefits shown on their social security statement at Full Retirement Age (FRA) only reflect their benefits if they continue working until their FRA. Your statement's social security benefits estimates assume the same rate of continued earnings until your retirement age.
However, this number may be significantly lower if you quit working and stop paying into social security in your 50s. On the flip side, if you keep working into your 70s, your benefit may be higher.
The Social Security Administration tracks your earnings, and your benefit would be adjusted upward if you have a year of higher wages, replacing a year of lower earnings in your 35-year earnings record.
What Should Young Widows Know about Social Security Benefits?
Unfortunately, widows under retirement age may receive poor advice from well-meaning friends or family directing them to take their survivor benefits immediately. This action, however, locks in a lesser amount.
If a widow is still working, all or a portion of these benefits may be withheld for the earnings test. Additionally, widows who qualify based on their own individual work history may take advantage of beginning one benefit and switching to another.
You will want to receive the lesser amount initially and take the higher amount later since that is the benefit you will get throughout your lifetime. This planning can be tricky, so consult your fiduciary financial advisor for help. Understanding how to build a retirement paycheck that integrates Social Security is essential for widows and divorced individuals.
Could I Qualify For Benefits When My Ex-Spouse Passes Away?
If you have been married for at least ten years, and that marriage ends in divorce, you may qualify for benefits if your ex-husband or wife passes away based on their work record. However, you may not be eligible if your earning record exceeds 50% of your ex-spouse's Primary Insurance Amount (PIA).
It is essential to check in with the Social Security Administration if you know about the passing of your ex-husband or wife. It is certainly worthwhile to see if you qualify within these guidelines. These benefits may be more than your own.
