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Claiming Social Security: The Most Popular Questions

Category: Financial and taxes in retirement

(Updated Sept. 2021) August 2019 — People have many questions about Social Security, but the ones that come up most frequently are usually related to claiming benefits. They are confused or unsure about when they can claim, how much they will receive, spousal benefits (including those for divorced people), special filing strategies, etc. This article will go over some of those questions and, hopefully, provide helpful answers. The Social Security website also has great FAQs and other helpful information.

When can I claim Social Security retirement benefits? Most people have a pretty good idea of the answer to this question – the earliest you can claim is age 62. The longer you wait to claim, the higher your benefit, up until age 70.

What is my “Full Retirement Age” (FRA)? This is the age when you fully qualify for your Social Security benefits. For people born between 1943 and 1954 the FRA is age 66. For those born in 1955 or after, it increases two month per year until it reaches age 67 for those born in 1960 or later (2027 for them). Note that “Full” is not a very logical term, since if you delay collecting your benefits past your FRA you will get higher than “full” benefits anytime up to age 70.

Should I delay claiming my benefit? This is probably the ultimate Social Security question, with a wide range of opposing answers from financial experts. Our opinion at Topretirements is that delaying as long as possible is better, provided you don’t otherwise need the money to live on and you have reason to believe you will live to something close to your “breakeven” point (see below). If you delay you, and your surviving spouse, will get a much bigger monthly benefit, adjusted for inflation, than if you collected early. It is a modest but guaranteed form of insurance against outliving your money in the event you live to a very old age.

The argument for taking Social Security early is that if you die soon after you retire you will have at least get some money. Those who advocate waiting would counter that if you claim early and you and/or your spouse live into your late 80s or more, you will lose out on tens of thousands of dollars that you might have really needed. Talk to your financial advisor and see what he or she thinks – there are many opinions on the subject.

What is the “breakeven” point for delaying? The breakeven point is the date where the amount you would have collected in benefits is the same, regardless of when you started collecting. Many people are proud to tell you that they have figured out the breakeven point. Not all of them have done it correctly. Social Security is indexed against inflation, for example, but that is often left out in the calculation. How long your spouse will live is another consideration. Implied rates of return are key also. When you take Social Security does change the breakeven point.

Andy Landis, author of Social Security” The Inside Story” gives a few examples. If a woman starts to take her retirement benefit at age 62, for example, her breakeven point might be age 78. Up until that age she would be ahead by starting benefits at 62 vs. waiting until her Full Retirement Age of 66. If she lives longer than 78, however, the better option would have been to wait until Full Retirement Age. If the same person starts collecting benefits at age 66, she is ahead until her breakeven point of 82.5; if she lives longer, waiting until age 70 to file would be a much better option. Different experts have different breakeven points, but give or take a few years, they are in the same ballpark. One factor favoring delaying is that Social Security’s actuarial calculations were made years ago when life expectancy was not as high it is now (not counting the influence of Covid deaths).

Is Social Security going to run out of money? Social Security currently has trust funds built up from the surplus of payments coming in vs. benefits paid out. Currently more retirement benefits are being paid out than come in. In 2034 the real problem begins. That is when the reserves in the retirement portion of Social Security (OASI) are exhausted and the fund must rely exclusively on taxes paid in from working people to cover promised benefits. Starting that year, unless something is done soon, Social Security will be able to only pay about 78% of promised retirement benefits (from the 2021 Trustees Report).

Most experts believe that something will be done to avoid what could amount to throwing millions of Americans into poverty. Unfortunately nothing much is happening in the government to fix the Social Security shortfall, despite pleas from the Social Security Trustees to address the problem while there is still time.

What kinds of spousal benefits are there? People who have been married at least one year can claim spousal benefits based on the earnings of their spouse. The benefits are only available if the other spouse is currently receiving benefits. The spousal benefit maxes at 50%, if both members of the couple are at Full Retirement Age when they start collecting. When one member of the couple dies the other is generally entitled to 100% of the deceased member’s benefit, something that many early claimers fail to appreciate. Divorced spouses can also collect on their former spouse’s earning records, if the marriage lasted at least 10 years and the ex-spouse is at least 62. The ex-spouse does not have to be collecting yet. If a spouse collecting on an ex’s benefit remarries, that benefit goes away.

The File and Suspend strategy for claiming spousal benefits is no longer available. The Restricted Benefit is still available to people born before Jan. 2, 1954. In that case you can receive a spousal benefit if your spouse is already receiving benefits, but can delay collecting on your own earning record until age 70.

Is Social Security income taxed? It depends on your total income. People who rely totally on Social Security will probably not pay any taxes on it. For those with large incomes, as much as 85% of their benefits could be considered taxable.

For further reading

Turning 66 in 2019: Time Running out for Restricted Benefit

Take the Quiz: What Is Your Social Security Quiz

What You Think You Know About Social Security Could Hurt You

Comments? Please share your questions about Social Security in the Comments section below.

Posted by Admin on August 13th, 2019

14 Comments »

  1. Just ab FYI. The spousal benefit option is still available if born before 1954. My spouse collects 1/2 of my SS payment monthly under this provision and can until she is70. Until then her SS benefit grows at 8% annually. Not much is said about this because most believe it was done away with under the last Administration but it was grandfathered in for those born before 1954.

    Editor’s note: Thanks Ralph. This is the “File and Suspend” strategy, and people born before 1954 are grandfathered in for it. But, if you haven’t already taken it, it is too late.

    by Ralph — August 14, 2019

  2. Also be aware that if you have above a certain income 2 years before you retire – for example, high salary, big bonus, inheritance, lottery winnings – your SS earnings may be docked for high Medicare “premiums”. So if you’re lucky enough to have a high income, save some of that $ for when you start SD and Medicare! Apparently sometimes people spend, for example, an inheritance then are shocked when 2 years later they need that for Medicare premiums – and SS will be docked if not paid. No one at SSA could explain why I got no SS for months until finally one smart employee figured it out. Lucky we had savings!

    by Jini — August 14, 2019

  3. So it sounds like one more reason to start collecting early; spousal survival benefits. If both spouses wait until full retirement age and one spouse drops dead before that date, the surviving spouse would lose out on the deceased survival benefits.

    Editor’s note: The surviving would get either their own benefit of that of the deceased spouse, whichever is higher. Even the spouse dies before their FRA, the survivor would be getting a benefit higher than if they had filed earlier.

    by Carl J — August 14, 2019

  4. Jini and others — A possible way to avoid the higher Medicare premiums based on prior 2 years earnings after your retirement is to file a one-time form SSA-44. This form will advise Medicare of your “life-changing event” (retirement), so that your prior 2 years of earnings will NOT be used to calculate your Medicare payment. Instead, your Medicare payment will be based on your anticipated retirement income.

    Not all Social Security representatives seem to be aware of this form. I retired last year, and had taken this form into my local office and filed it in person with a statement from my employer confirming I retired. My Medicare payment was adjusted downward. I’ve gotten letters twice since then, trying to adjust my payment back up. Each time, I’ve taken a copy of my original SSA-44 into my local office and the payment was adjusted back down. It’s been worth the minor aggravation.

    by Kate — August 15, 2019

  5. Confused by the editors reply to my previous comment. The article states that spousal benefits based on the earnings of the other spouse but the other spouse must currently be collecting the benefit. If both spouses are waiting until FRA to collect and one spouse dies prior to FRA, how can the surviving spouse collect a spousal benefit? What am I misunderstanding?

    Editor’s note: I see the confusion. Here is what we think happens. Even though the deceased spouse hasn’t filed, the survivor would still be entitled to benefits based on the deceased spouse’s earning record (or the survivor’s record if higher). We can’t find a specific example of how this works, but it seems logical that the benefit would be based on the deceased spouse’s record at the time of death or when the survivor files for benefits.

    by Carl J — August 15, 2019

  6. My wife died a few years ago at the age of 56. I am now 63. I filed for survivors benefits (last year) based on her work record and now receive $775 a month. In a few years, I will cancel that and file for my own benefits based on my work record. I will then get $2,100 a month at age 66 (FRA) or $2,700 a month if I wait until I’m 70.

    by Dave M. — August 21, 2019

  7. Can’t overestimate the importance of being aware of spousal benefits if you were born before 1954. Few couples seem to realize they have this option. The key for us is that our maximum monthly SS benefits are reasonably close in dollars. So our strategy is to have the spouse with the lower payment (in our case, wife) begin taking the full benefit, while the spouse takes the spousal benefit (50 percent). The higher monthly benefit continues to grow. Within 2.5 years, that higher monthly benefit’s survivor benefit will exceed the maximum benefit that the lower monthly payment could possibly grow to. It’s like getting a few free years of half a benefit. In my husband’s 69th year he will take his own full benefit, which is the amount I will get if he dies. Waiting has allowed that survivor benefit to grow. It’s confusing, but it can be worth puzzling out. And no one tells you about this unless they’re doing it themselves!

    by Pam Thomas — August 21, 2019

  8. Exactly, Pam. My husband and I are using the same strategy for the same reasons. I learned about it from Laurence Kotlikoff’s book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security”.

    Like many of life’s decisions, the more research we do on the front end the fewer regrets we are likely to have on the back end.

    by JCarol — August 22, 2019

  9. The knee jerk reaction for many planners is to say wait because of more benefits at a later age. However they don’t factor in the growth on the money they are replacing the social security with. In my case I will have to use my 401k money which will then not be making any interest. Add that on top of the money I am foregoing my break even age is actually 93.

    by Michael Milosovic — September 19, 2021

  10. Pam and others. Reading these posts and trying to make sense of them. So, it appears the system gives an advantage to married couples? It doesn’t seem right. Is anyone here divorced after a long term marriage? Seems that women in our generation are disadvantaged if we stayed home to raise children because those years count s zeros in the 35 year look back. So many of my divorced female friends now are still working into their seventies to try to catch up in terms of SS due to those years. Back then, most women spent years raising children, as there were no options or “day care” and it just wasn’t done. I sure wish they would either not count those years, or give credit for those years. There are wo many loopholes for married couples to maximize SS payments that it doesn’t seem right.

    by Maimi — September 20, 2021

  11. I feel the way Maimi does. When you are divorced, you really go it alone. The only thing that I could hope for besides my own benefit (I worked for over 40 years since I was 18) is the possible survivor benefit if my ex were to die before I do. Couples have the advantage of two incomes and two social security benefits which helps greatly in retirement. I was married fifteen years. I did not mind earning my own money as a nurse, my ex worked at a high-level job for the Federal government since 1979. He took a three-year break in the 1990s to start a company that failed. I do feel couples have all the advantages when it comes to social security benefits, women who could not work due to child care or care of elderly adult parents lose out.

    by Jennifer — September 21, 2021

  12. Hello Maimi,

    So long as a person was were married (an actual marriage, not common law) for 10 or more years to the same person they would collect the higher of the 2 social security checks therefore they are not disadvantaged by being a divorcee as it pertains to SS. The system is set up for said person to receive the higher of the 2 checks specifically so they are not punished for partaking in homemaking. Also, there is alimony, getting half of ex-spouse pension/401k/IRA/real property division, etc. so a divorced homemaker is not destitute simply due to the act of divorce.

    Regards, Danno

    by Danno — September 21, 2021

  13. Danno, not sure where you got your information, but it is not accurate. A divorced person can only get 1/2 of a former spouse’s amount if it is more than her own. Homemakers get a zero in the calculation for every year spent out of the paid workforce. This lowers the amount of SS many women in my generation get because they do a 35 year look back calculation. This has left many divorced women destitute and in poverty. The policy has a disparate impact on women with children. It appears that the way this will be addressed in the future if the current proposals are passed, is that the government will raise our children with “universal daycare” so all women can work outside the home. I would prefer to see a change in the SS calculations so that if a parent stays home, the zero does not hurt the. For the rest od their lives. It is my opinion that it is in the best interest of children and society that parents raise their own children if possible.

    by Maimi — September 21, 2021

  14. Miami, I agree with your suggestion that zero years ratings should be dropped from calculations.

    by Maryann — September 22, 2021

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