Planning for when to begin collecting Social Security retirement benefits is especially important for women since women tend to live longer than men. It’s essential that you spend time analyzing this crucial element of your retirement income, regardless of your age or work history. With many options for claiming benefits, the risk of incomplete analysis is the potential forfeiture of thousands of dollars. It isn’t the Social Security Administration’s job to figure out what’s best for you. It’s your responsibility.
The reason the decision can be complicated centers around the concept of “spousal benefits.” A woman can receive Social Security benefits based on her earnings, her husband’s earnings (including a deceased or, in some cases, an ex-husband’s earnings, even if she doesn’t qualify for her own benefits), or a combination of husband/wife earnings histories. Choosing when to start taking benefits — and how to best coordinate with a husband’s benefits — can make a huge difference in how much money you will ultimately receive.
It pays to wait
Social Security retirement benefits can begin as early as age 62, and about 75% of those who are eligible for benefits choose to take them that early. Some who elect to start at 62 are worried about the long-term solvency of Social Security; others are concerned about dying before receiving what they paid into the system. But if you wait until your Full Retirement Age (FRA), you’ll receive a higher monthly benefit — and even more if you wait until age 70 (see table for your FRA.)
To show how this works, I accessed my work records and benefits by creating a “my Social Security” account online at www.ssa.gov/myaccount (you should do the same). Since I stayed home with our kids while I was in my 30s, there are several years on my record with no earnings. Because I started a business in 2007 and began earning income in 2009, my benefits estimate has increased. At age 62, my estimated monthly benefit based on my earnings would be $795. At my FRA of 67, it rises to $1,196 (50% higher), and at age 70, my benefit would be $1,519 (91% higher than my age-62 benefit!).
While you might think taking a smaller benefit for a longer period of time would lead to a higher overall payout, for most people it’s better to wait. As we’ll soon see, especially for married couples — and even more so when the husband is the higher earner — it pays for the husband to wait as long as possible.