How wise are your Social Security decisions? Social Security benefits account for approximately one of every three dollars received by US retirees, yet many Americans remain unclear about its nuances and unaware of the degree to which their claiming decisions affect the amounts they receive. Most simply start their benefits as soon as they become eligible at age 62…or at a traditional full retirement age between 66 and 67. But: A 2019 study by investment firm Capital One found that only 4% of retirees make financially optimal decisions about when to claim their Social Security benefits. The other 96% cost themselves an average of $111,000 per household.

Here’s what you need to know about the benefits available to you and how to decide when to claim them…

Waiting to start taking benefits usually is the smart strategy. You probably already know that you can start your Social Security benefits as early as age 62 or as late as age 70—or even later, though there’s no financial upside to waiting past 70. And you probably understand the basic trade-off involved in that decision—the earlier you start these monthly benefits, the more benefit payments you receive…but the later you start them, the larger each payment will be. Example: A retiree might receive a $1,050 monthly benefit if he/she starts receiving benefits at age 62…or $1,860 if he waits to age 70. (The amounts you personally receive will vary based on factors including your earnings history and year of birth.)

Problem: There’s no way to know for certain whether claiming early, late or somewhere in between will result in the largest total Social Security benefits for you because there’s no way to know how long you’re going to live. People who live long lives come out way ahead if they claim later…but those who die before approximately age 81 would have been better off claiming sooner. Most retirees will receive more from the Social Security system if they wait until they approach or reach 70 to claim. There are several reasons for this, among them that lifespans are increasing. The rules for how much extra ­retirees receive if they wait to claim haven’t been updated since 1983, when the expectation was that the typical 65-year-old would live an additional 17 years—but today, the average 65-year-old has more than 20 years of life remaining.

Waiting until 70 to claim has other advantages as well. It serves as a sort of longevity insurance—your Social Security benefits are guaranteed to continue as long as you’re alive, so maximizing the amount you receive each month reduces the odds that you won’t have enough to pay your bills late in a long retirement. It provides a measure of inflation insurance—Social Security benefits include an annual cost-of-living adjustment.

Waiting until age 70 also can have tax advantages if you remain in the workforce well into your 60s—Social Security benefits are partially subject to income taxes above certain income thresholds, so not claiming until you’re retired reduces the odds that you’ll have to pay a significant share of your benefits to the IRS.

Exceptions: Claiming before age 70 could make sense if you desperately need the money…or if you have serious health problems or a family history that suggests a long retirement isn’t likely. It also can make sense for a widow/­widower or one partner in a married couple to claim before 70—more on these possibilities below.

Married people who earned significantly less than their partners usually should claim years before they reach 70. The ideal claiming ages for these spouses often is their full retirement age, which is between 66 and 67 depending on year of birth. Married people typically are eligible to receive the larger of their own monthly retirement Social Security benefit or a “spousal benefit” equal to as much as 50% of the spouse’s “primary insurance amount” (PIA)—that’s the monthly benefit the spouse would receive at his/her full retirement age. If that spousal benefit is the larger of the two, there’s no advantage to delay claiming beyond full retirement age—but your retirement benefit, based on your own earnings history, will continue to grow larger for each month you wait to claim from age 62 until 70. Your spousal benefit increases for each month you wait from 62 only until your full retirement age. Some couples overlook this detail and miss out on years of benefits.

One twist: You cannot claim spousal benefits until your spouse also begins collecting his/her own retirement benefit. If your spouse has not yet claimed when you reach your full retirement age, you could initially claim your own benefit, then switch to spousal benefits when your spouse eventually does claim his/her retirement benefits.

Warning: A married couple’s claiming decisions can get especially complex. It could be worth asking a Social Security analyst or financial planner to crunch the numbers and work out the claiming dates that make most sense for you and your partner.

Widows and widowers often can claim their late spouse’s benefits. If your spouse dies and had been receiving benefits, you likely will be entitled to a “survivor benefit” equal to the amount that your late spouse had been getting from Social Security. If your late spouse died before starting his/her benefits, your survivor benefit will be calculated on factors including the late spouse’s earnings record and age at death. Unfortunately, survivor benefits often go unclaimed, especially when the spouse who handled the couple’s financial affairs dies first.

Widows and widowers can claim survivor benefits as early as age 60—or age 50 if legally disabled—but claiming before full retirement age reduces the amount received each month. But: There is no upside to waiting until age 70 to claim survivor benefits—like spousal benefits, these benefits do not continue to increase after the widow/widower reaches full retirement age. People who are widowed before they reach full retirement age often can maximize their total Social Security benefits by either starting their own benefit as early as age 62, then switching to the survivor benefit upon reaching full retirement age…or starting their survivor benefit as early as age 60, then switching to their own benefit at 70.

Worth noting about survivor benefits: Widows/widowers are likely to be entitled to survivor benefits as long as the marriage lasted at least nine months before the late spouse’s death. But: They cannot receive survivor benefits if they currently are remarried unless the remarriage occurred after the surviving spouse’s 60th birthday. And they cannot receive both a survivor benefit and their own retirement benefit at the same time—as with spousal benefits, when entitled to multiple benefits, they receive only the larger amount of the two. Survivor benefits could be available even if the late spouse died young, before establishing the extensive earnings history usually required for Social Security benefits.

If you’re divorced, you might be able to claim benefits based on your ex’s earnings. These benefits are similar to the spousal benefits available to married people—but they’re more likely to be overlooked because they could be based on the earnings history of someone you haven’t been with in decades. To qualify, the marriage must have lasted at least 10 consecutive years and you must not currently be remarried. You can claim these benefits even if your former spouse has not yet begun receiving his/her own benefits, as long as it has been at least two years since the divorce was finalized.

When your ex dies, you also could be entitled to a survivor benefit based on his/her earnings—again, only if the marriage lasted at least 10 consecutive years. But: You are not entitled to survivor benefits based on your late ex’s earnings if you currently are remarried.

As with other survivor benefits, you can claim as early as age 60—50 if disabled—but the monthly amount you receive will be reduced if you claim before full retirement age. And as with other survivor benefits, there’s no reason to delay claiming until after your full retirement age. Claiming benefits based on an ex’s earnings has no effect on the benefits received by that ex or his/her new spouse. There’s no need to communicate with your ex to claim these benefits.

Do-overs are allowed…sometimes. If you’ve already started your benefits, you’re not necessarily stuck with that decision. Two options that might be open to you…

If less than 12 months have passed since your benefits began, you can “withdraw your Social Security application.”  You’ll be required to repay the benefits that you’ve received, but once you do that, it will be as if you never claimed at all. Warning: You can do this only once in your life.

If you’ve reached your full retirement age, you can “suspend” your benefits. There’s no 12-month time limit with suspending and no need to repay benefits already received. Once you do this, your future monthly benefit will increase by two-thirds of 1% for each month the suspension remains in force up to age 70—that’s 8% per year.

These benefit-claiming do-overs are particularly useful at the moment—lots of people claimed Social Security benefits when they lost their jobs during the pandemic but are considering re-entering the workforce now that the labor market is booming.

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