Dear Rusty: I’m 59 years old. When do I need to start looking at what’s available for me – when I start getting closer to age 65? Signed: Planning Ahead
Dear Planning Ahead: Kudos to you for thinking about Social Security in advance! Fifty-nine years of age is a great time to start planning. Your strategy may be different, depending on whether you are married, if you plan to continue working well into your sixties (or later), your health, and your expected longevity.
You have an 8-year window between ages 62 – 70 during which you can claim your benefits, and the age you claim will greatly influence the amount of your benefit. If you claim at age 62, your payment will be 30% less than it would be if you wait until your full retirement age (FRA), which for you is age 67. If you choose to delay past your FRA until age 70, your benefit will be 24% more than it will be at your FRA. Your full retirement age is when you get 100% of the benefit you have earned from a lifetime of working – claiming earlier will result in a lower benefit and claiming later (up to age 70) will mean a higher benefit (8% more per year of delay).
The age you claim should consider your plans for working, because if you claim earlier than your FRA and continue to work you’ll be subject to Social Security’s earnings limit until you reach your FRA. If you exceed the limit ($17,640 for 2019), SS will take back $1 for every $2 you are over the limit by withholding future benefits. The earnings limit goes up by about 2.5 times during the year you reach your FRA and goes away once you reach FRA. If you exceed the earnings limit SS will withhold benefits for as many months needed to recover what is due, which means you could go months without receiving any benefits. Although, at your FRA, you will get time credit for any months withheld (thus a benefit adjustment), it could (depending upon the amount) take many years to recover any withheld benefits.
Your health and expected longevity are key factors in determining the age to claim SS. The life-expectancy for the “average” man your age today is about 84. If your health and family history suggest you will enjoy at least average longevity, then delaying your claim to a later age will yield more in cumulative lifetime benefits, as well as a higher monthly payment. Conversely, if you’re in poor health and expect less than average longevity, delaying may not be a practical option for you.
If you are married there are special considerations if your wife is, or was, a lower-earner or stay-at-home mom and has a smaller SS benefit than you. Your wife may be eligible for a spousal benefit from you and will also be eligible for a survivor benefit if you should predecease her. The widow’s benefit your wife would be entitled to is based upon the actual amount you are receiving at your death. If you claim at age 62, your widow would get your age 62 benefit, but if you wait until later (up to 70) to claim, your widow gets the higher benefit you were receiving because you delayed claiming (if that’s higher than her own).
Finally, your financial needs should be included in your planning. If your circumstances are such that you do not urgently need your Social Security benefits to live comfortably, then delaying your claim will provide you with a higher monthly benefit in retirement. If, on the other hand, you need the extra money to make ends meet, then claiming early makes sense (but beware of the earnings limit mentioned above).
By setting up your personal online account at www.ssa.gov you’ll be able to see the benefit amounts you are estimated to receive at age 62, at your FRA, and at age 70. Having these numbers, and taking the above points into consideration, should allow you to develop a strategy for when you should claim your Social Security benefits.
By Russell Gloor • AMAC Certified Social Security Advisor