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Social Security - Decisions Before the Decision

February 11, 2013

Applying for Social Security retirement benefits is neither complicated nor time consuming. But that does not mean you should not take the time to understand your options. In fact, you probably want to start learning about your social security retirement income options at least one year before you think you may retire. Why? Because it is a big decision that you and your spouse will be stuck with for the rest of your life.

Here are a few things to consider long before applying for benefits:

  1. Find out if you are eligible for Social Security retirement benefits. You or your spouse must have 40 credits to receive Social Security benefits. To find out how many credits you have, view your SS earnings statement online (http://www.socialsecurity.gov) or call the SSA (1-800-772-1213).

  2. Keep your earnings steady at least until you reach full retirement age. Social Security calculates your benefits based on your wages over your work history, using your highest 35 years in its benefits formula. If you work less than 35 years, take long breaks from the workforce or your earnings take a dip, this will affect your monthly benefit amount.

  3. Pick your retirement date carefully. There are three main retirement dates to consider when applying for Social Security--early, full or normal, and late.

    • Early retirement age is 62
    • Normal retirement age depends on your date of birth, but ranges from age 65 to 67
    • Late retirement age is the years after normal retirement age up to age 70

  4. You can start receiving SS retirement benefits at age 62, however, your benefits will be about 25% less than if you had waited until normal retirement age. The benefits are reduced forever. On the other hand, if you delay receiving SS retirement benefits until after normal retirement age, your benefits will increase about 8% per year up to age 70.

    For example, if your monthly benefit at normal retirement age is $1,000, it will be about $750 at the earliest retirement age (62) and about $1,360 at the latest retirement age (70). Use the SS retirement plan estimator to see what your benefit amount would be at any age between early and late retirement (http://www.socialsecurity.gov/estimator/).

  5. Coordinate commencement of your SS retirement benefits with your spouse. Once you apply for benefits, your spouse may apply for spousal benefits. Spouses may receive benefits based on their own record or up to 50% of their spouse's benefit, whichever is greatest. If you can delay filing for benefits until your normal retirement age, you can do what is called "file and suspend." This allows you and your spouse to file for benefits, then you can suspend benefits for yourself while your spouse receives a spousal benefit and your benefits as the main beneficiary continue to grow until age 70. This scheme is legal and is best suited when one spouse's own benefit is less than 50% of the other spouse's benefit.

    If a spouse's benefit would be greater than 50% of the other spouse's benefit, the older spouse could file for benefits at normal retirement age and then suspend benefits. The younger spouse could begin receiving a spousal benefit. Both spouses could continue to work until age 70 and earn credits, resulting in a higher benefit amount for each spouse. Lastly, keep in mind that if one spouse dies, the surviving spouse receives either their own SS benefit or the deceased spouse's, not both (http://www.ssa.gov/sf/FactSheets/WomenandSSrev1.pdf).
Before deciding when to apply for SS retirement benefits, determine how long you and your spouse want and are able to work. Also, consider if you are willing to accept a lower benefit amount for the rest of your life or if you are able to delay receiving benefits for a larger benefit amount. The decisions you make about when and how to start receiving Social Security retirement benefits require consideration and time.

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