“When should I claim Social Security?” This is the question that is on every retiree’s mind. While there is no one-size-fits-all solution, deciding when and how to claim doesn’t need to be complicated. In fact, by focusing on a few simple factors, the decision can be easy. Here are three important things to consider.
You are probably going to live longer than you think. Did you know that the longer you live, the farther out you push your life expectancy? Right now, for a 62-year-old married couple considering when to claim their Social Security benefits, the life expectancy for the husband is age 84 and the wife’s life expectancy is age 86. There’s a 50% chance one spouse will live to age 92.
If you are in relatively good health in your 50s and 60s, you have to plan for the possibility of a long life. Delaying the claiming of your Social Security benefits as long as possible, ideally until age 70, will increase the size of your monthly benefit by 76% when compared to claiming your benefits at age 62. So if you were to claim your benefits at age 62 and receive a monthly check of $1,000, had you waited until age 70 to claim, your monthly check would increase to $1,760. Delaying substantially increases your monthly benefit and greatly reduces the chances that you will struggle financially at any age in your retirement years.
Cost of living adjustments (COLA)
In retirement, Social Security recipients receive an annual cost of living adjustment (COLA) from the government. For most people, it is the only pay raise they will receive in their retirement. With that in mind, you should consider a Social Security claiming strategy that will maximize your COLA benefit so you can receive the biggest dollar increases in the size of their benefit check every year for the rest of their lives.
While everyone receives the same COLA percentage, those with bigger Social Security benefits receive bigger dollar increases. For example, a 3% COLA on a $1,000 monthly Social Security benefit claimed at age 62, would increase it to $1,030 per month, a $30 increase. However, that same COLA on a $1,760 monthly benefit claimed at age 70, would increase it to $1,813, a $53 increase. By delaying Social Security, you increase both the size of your benefit and the annual impact of COLA. Over the course of 20 years this can make a huge difference in maintaining your quality of life.
If you’re married, the Survivor Benefit is an incredibly important Social Security feature to consider. When both spouses are alive, they receive two checks from Social Security, one made payable to the husband and other made payable to the wife. However, after one spouse dies, one of those checks is going to stop.
Luckily for the surviving spouse, he or she can continue to receive the bigger of the two checks. The bigger check is considered the Survivor Benefit, a feature that reduces the probability that the surviving spouse will struggle financially after the first spouse dies. Since women have longer life expectancies than men, they are the ones who typically receive the Survivor Benefit—this is a critical feature for them.
So, when should you claim Social Security?
Over the last three decades, the number of people delaying until their full retirement age of 66 to claim Social Security has risen to nearly its highest level. On the other side of the coin, the number of people claiming as early as possible, at age 62, has fallen to its lowest percentage in nearly three decades. More and more people are realizing the advantages of delaying, or even maximizing, their Social Security benefits, and you should consider it, too.
Social Security provides a number of options that make it easy to delay. In fact, in many cases, you can still receive Social Security income even while you are delaying! In future posts, we’ll look at these strategies and how to make it as easy as possible to maximize your Social Security benefits.
Brian Doherty is a nationally recognized expert on Social Security and and a frequent speaker and media commentator on this topic. He is the author of Getting Paid to Wait: BIgger Social Security Benefits – The Easy and Simple Way, and writes and recurring column on retirement for Considerable.com.