Guided Retirement Income Planning- Chapter 15

Retirement benefits – Single or married couples can apply anytime between age 62 and 70.

• Spousal benefits for working spouses – Those working spouses who are eligible for both their own benefits and those of their spouse, will receive the higher of the two amounts. For spousal benefits, both spouses must have applied for their own benefit.
  
  
• Spousal benefits for non–working spouses – The non-working spouse must be 62 years old and married for more than one year. The working spouse must have filed for his or her own benefit. The benefit is based on the working spouse’s Social Security benefit. The maximum benefit for the non-working spouse is 50% when at FRA and is less prior to FRA. No deferred credit will accumulate beyond FRA.
  
  
• File a restricted application – This is a strategy for married couples that is going away shortly. This strategy allows a person filing the restricted application to receive two benefits from Social Security- a spousal benefit and then a higher personal benefit later.
  
  
• Spousal survivor benefits – A surviving spouse’s maximum Social Security benefit is the greater of the surviving spouse’s own retirement benefit or 100% of the deceased spouse’s retirement benefit amount. Benefits can be reduced for the surviving spouse if benefits are received prior to FRA. Benefits can start at age 60 at a reduced rate. There can be potential survivorship benefits for younger children, as well.
  
  
• Divorced ex-spouses – They can receive both spousal and survivor benefits. Spousal benefits are based on an ex-spouse’s work record. A divorced spouse must have been married for at least 10 years, be unmarried, at least age 62, and not have a higher benefit based on their own record. The ex-spouse must have been divorced for at least 2 years and qualify for benefits.

  Survivor benefits are based on the age of the ex-spouse. To be eligible, the surviving spouse must have been married for at least 10 years, be 60 years old, and not have a higher individual benefit. Benefits will end if the surviving ex-spouse remarries before age 60.

• Disability benefits – To be eligible, an individual must be unable to do any kind of substantial, gainful work, and the disability must be expected to last at least 12 months.

IMPORTANT POINTS AND STRATEGIES

• Factors to consider when to claim your benefits: health status, family history of longevity, marital status, employment record and status, financial needs, and availability of other assets. If you are unhealthy with a shorter life expectancy, then early claiming may work best. If you expect to live a long life, it may make sense to delay your benefits. Delayed credits mitigate longevity risk and provide greater spousal and survivor benefits. (Subject to limits).
  
  
• Strategies can differ for married couples if there is a large gap between the age of the spouses and their benefits. It may be appropriate for the higher earning spouse to wait until age 70 to receive benefits. Delayed claiming will provide longevity insurance for both spouses. Generally, the younger spouse may consider an earlier claim. 

• If you defer taking social security benefits, you may experience a temporary income gap. You will want to review your income and determine how best to proceed: you may choose to work longer; work part-time and take distributions from various accounts; or tap into home equity in some form or another.
  
  
• Remember that only worker benefits receive deferred credits. Spousal and survivor benefits do not receive deferred credits past FRA.
  
  
• Social Security looks at your highest 35 years of earnings to establish the previously-referenced average indexed monthly earnings (AIME). If you want to increase your Social Security benefits, you can do so by working additional years or by earning more money.
  
  
• As related to the WEP, if you have more than 20 years but fewer than 30 years of substantial earnings, you can increase your retirement benefits by working more years.
  
  
• Claiming decisions are viewed as part of a comprehensive retirement income planning strategy. In doing so, you should try to focus on the later years in retirement (no-go years). New retirees (go-go years) can go back to work to make up income gaps while elderly do not have that luxury.
  
  
• You can withdraw your Social Security application if you have been receiving benefits for less than 12 months. If you do this, then all benefits received from Social Security will need to be repaid. This can be a viable strategy if, after further analysis, you realize it would be better to file at a later date for deferred credits.
  
  
• Voluntary suspensions may be considered if you have reached FRA, are not yet 70, and you have received benefits but realize that you do not currently need them. The advantage of doing this is that you will earn retirement credits and cost-of-living adjustments from where your benefits left off. Be aware, if anyone else is receiving benefits on your record, their benefits will be suspended as well.
  
  
• Another reason to defer claiming your Social Security benefit is that the delay creates a snowball effect for both the deferred credit and the compounding cost of living increases. You are ultimately increasing your flooring strategy. Think of this higher amount as an income annuity for life.
  
  
• If you have lower taxable income, some or all of your social security retirement benefits may be tax-favored. Please consult with your tax or financial advisors to determine if this tax treatment applies to you.

Social Security often provides the foundation for a retirement income plan and is considered a flooring strategy to help meet essential spending needs. It will need to be modified at some point in the future due to demographic changes and the Social Security Trust Fund projections. Many people believe that Social Security will fail and not be around, while experts believe Social Security is here to stay in some form or another. Increasing Social Security literacy will allow you to have the confidence to delay benefits if it makes sense. Although the rules governing Social Security are complicated and dynamic, take your time, analyze your situation, and determine the best claiming strategy as part of your overall retirement income plan.

Again, make sure you login to “ssa.gov” to review and understand your Social Security benefits. We also recommend that you consult and verify all strategies with your local Social Security Administration officer before implementation. Rules may change and impact the strategy chosen.