I know there have been some rules changes regarding claiming on your spouse’s earnings, though I don’t know exactly what they are. I played around with some simulators a couple years back and the advice was to start claiming on your spouse starting at age 62 - but defer it for a few years, then eventually start claiming on your own when you hit full retirement age. It was a weirdly complex scenario - and I, who usually can follow stuff like that, never quite grokked it.
I think in our case (my husband and I have similar earnings history, though I have more years of earnings at the moment) it wouldn’t make any real difference.
My brother turns 66 this year. He’s about to hit “full retirement age” but is still working part time. Not sure whether he’s doing to start collecting this year or not. He told me that he can claim some benefit from his ex-wife’s earnings (that I think he would collect in the interim, until he turns 70) - but that this loophole was closed for people younger than he is now.
There were several versions of claiming half (or less) your spousal benefits. The last SS reform law got rid of one them entirely and another was put on life support. Only if you were born before January 2, 1954* can you still do that. You have to be FRA or higher, spouse already taking SS, etc. But it allows you to collect SS while your future benefits increase.
Bog standard spousal benefits still exist but note that if your own SS is higher than your spousal support, they will give you that instead. No delaying of taking your own SS later.
So in a few years it will be pointless to do this for the purposes of letting your own benefit build.
It doesn’t matter how you get the your AIME (average indexed monthly earnings). Either of your calculations above would get you to the same monthly amount and would provide the same SS amount (as long as you were below the aforementioned cap). Your older income has an index factor applied to it to account for inflation and interest, so in theory, it shouldn’t matter when you earned your money.
I agree with this.
I have issues with the litany of articles (click bait by and large) that discuss SS and how much sense it makes to wait until once full retirement age or beyond. While the monthly payout is larger by waiting, you pay a pretty serious price by delaying. I’m still in my mid-50s so I have some time to go, but we had an advisor at work telling us all to wait until 70 because that made the best financial sense.
When I pointed out that I would pass up $210,000 from age 62 to 70, he seemed surprised (which he shouldn’t have been if he was all that). Waiting until 70 only makes sense for me when I hit 83. And by that time, is the extra money really going to change my life?
There are some spousal benefit issues (my wife is a fair amount younger than I am) that might come into play in the above considerations, but not for most people.
Yes, it’s complex, that’s why I went in person to talk to a live human being who could run several scenarios for me. There’s also a difference between claiming on the account of a deceased spouse (my situation) vs. a living spouse.
Yes, but you lost all the money you could have collected from 62 to 70, which has to be taken into account. Even with the increased income, you may not make that back until you are in your 80s.
In my family, if you don’t get heart disease by your mid-40’s you stand a very likely chance of living into your late 80’s. I don’t have heart disease. I stand a very good chance (barring accident or other unforeseen occurrence) of living into my late 80’s. So I do all my retirement planning with the expectation I will need to fund my retirement to at least age 90.
Consider, too, that for someone with minimal retirement resources increasing that monthly benefit might have a greater impact than for someone with more resources (savings/pension/whatever).
Then you have situations like mine, where I can draw off my late spouse’s account (maybe sock that away for later) until mine max’s out in benefit level.
It’s more complex than it initially appears, which is why speaking to someone with actual expertise in this area may be more helpful than trying to do it on your own with on-line tools.
If people i my family normally only lived into their mid-70’s, or I had some sort of chronic health issue right now, then what you say makes a lot of sense - don’t put off retirement too long because you might not live to collect it.
You also have to consider if you will still be working until 70, and how that might affect both your income and your retirement savings.
If you plan to wait until you are 70 and die at 69 and 11 months, your estate gets nothing. If you draw at 62 and save it (you don’t need it or you couldn’t wait until 70), you have something for your estate. Of course the estate issue only matters if you want to leave someone something.
Are spousal benefits dependent on when the person starts drawing or when their spouse starts?
Drawing SS at 62 for many people is not a good choice. If you are under full retirement age there is a limit on how much income you can earn. If you go over the limit then your SS payment is reduced. Now if you quit working at 62 it is a better choice because the break even point is around 82 or 83.
In my case I sign up to receive SS when I was over 66. I was given 3 choices. Roll back my start date to my Birthday when I turned 66, and receive a check of $17,000 in back payments. Roll back my start date to January of that year, receive a check of $14,000 in back payment and have my monthly benefit increased by $49 a month. Or have my start date be the end of the month, no back payments and it would increase my benefit by $50 a month. I rolled my start date back to my 66th Birthday.
This is probably the most accurate statement on this thread. We all have to do some research, including going to the SS office or paying a qualified, knowledgeable financial advisor a one time fee to understand what works for you.
But my one complaint with SS discussions over all, among individuals or in print is the one item I mentioned up thread. This belief or meme that waiting longer for social security means a bigger check per month and that by definition is a smarter move. The first part is correct of course, waiting will give you a higher, monthly amount. But that doesn’t mean it’s the best option. In my case by waiting from 62 to 70 I will have left over $210,000 on the table by the time I cash my first SS check. That is a ton of money to make up - and in my case I don’t overcome that until I’m 83.
I don’t know what I’ll do with the extra cash at 83, even if I’m still on the planet at 83! But I could put it to good use at 62, 63, 64 . . .
There’s also an assumption in a lot of retirement planning discussions about having an estate - but there are people like myself who do not have children and who have few family left, which they are likely to outlive. Doesn’t it make more sense to spend the money on myself while I’m alive?
There’s an assumption that you’ll only live to the expected lifespan of your gender… but what if you live longer? It would really suck if you have to go back to work at 85 because you ran out of money.
There’s a lot of assumptions about this thing called “lifestyle” - the notion that when you retire you’ll travel, or need X percentage of your current income, and so on. But is that really so? I know plenty of older people with no interest in traveling (myself - I traveled when I was younger. It was fun, but I’ve spent the ensuing years pursuing other interests so I guess not a huge priority for me). Plenty of older folks downsize - my parents, for example, sold their final house, invested the money instead of buying something new, and rented much smaller apartments until mom died, after which dad took up residence in two rooms (mother-in-law apartment) in my sister’s house. He said he loved not having a rent or mortgage. Right now I’m downsizing 30-40 years of accumulated stuff from my late spouse and myself and, honestly, while I’m not enjoying the emotional journey to get there I’m beginning to like having less stuff and living in a smaller but more efficient space.
So, at least some of us can downsize considerably and that won’t necessarily be a bad thing - which can have a huge impact on your retirement lifestyle and how much money you need. We may even want to do that independently of financial need.
For someone not making much money it might, as pointed out, make more sense to retire at 62. Or to start benefits at 62 even if they’re partially reduced while continuing to work because that monthly benefit would still be a welcome income boost. Someone making a crapton of money might make a different choice, or simply not care about SS because they’ll have so many other resources in retirement.
There are a LOT of assumptions baked into the free on-line retirement calculators. At best, they’re a start. But only a start.
It is not my area of expertise but one investment advisor said that one mistake is assumptions about retirement expenses. Many calculate a percentage of current. The reality is that some people spend more in the first few years doing bucket list trips and then settle into a lower expense level. The best advice I received when I was considering retirement was to be realistic about your expected lifestyle.
I retired early and told my son that he had to kill me if I lived past 92.
Again, the variations here are immense. For us, our current expenses are quite small and our expectation will be that they will get greater later on. (Care homes and all that.)
We don’t need extra money now but will probably need more later. This affects our decisions as to what money gets moved out of taxed deferred things and when. And also SS. But we are lucky in being able to do the 1/2 spouse thing while allowing the benefits to maximize. The Math on that shows a much greater win in fewer years.
I largely agree with you that waiting to take social security generally doesn’t make since. In my case (because I know the numbers), I will have forfeited $129,000 in the years between 62 and 67 by waiting until I’m 67 to take social security (SS). And I don’t break even on that until I’m 77. (If I waited until I’m 70 to take social security, I will have forfeited $211,000 and I wouldn’t make that up until 79. There are many, many variations (66 to 70 etc.) that I won’t go into. But we can all agree, there is a breakeven point where waiting would make the most sense. And if we all knew that we’d be skiing and hang gliding at age 100, we’d wait until 70.
So let’s look into the spouse issue. Say I take SS at 62 and I die at 67. You’d say “it’s great that you took it early, you got that $129,000 that you wouldn’t have received if you’d waited.” But my wife is 11 years younger than I am, and she didn’t work as long as I did. Because of that, using my social security benefit is her best option when her times comes. She can either take 70% of my benefit at age 60, or 100% of my benefit at age 66. For comparison the best and worst case scenarios in this example are as follows:
$25,000 @ 70% = $17,500 at age 60 using my age 62 benefit
$50,000 @ 100% = $50,000 at age 66 using my age 70 benefit
That’s quite a swing, especially if my wife lives for another 30 to 35 years.
No matter how you look at it, my decision in the scenario above will affect her amount. So we will in essence be using my social security though my life expectancy, and then using my social security through her life expectancy. Because of that compounding of our life expectancies if you will, we will both live though that breakeven point where waiting makes sense.
As I started this discussion, if I was single and not working after 62, it would be a no brainer to take SS at 62. Or if I was married to a person who’s SS was comparable to mine I’d still take it at 62. But if I believe that my wife’s best option will be take use my benefit when I die and she will live at least into her early 70s, it makes sense to wait on SS for her benefit.
Waiting to take Social Security until 70 allows you to use it as longevity insurance, much like an annuity, but one that’s designed to be priced fairly, not to make the company selling it money. The system is designed so that for the average person it does not matter when they start taking SS. It will matter for each individual person, obviously, and each person has to plan based on what they know about the longevity of their family. Widows who were part of 2-income families do have a leg up as they can start taking their deceased spouse’s SS as soon as they quit working (or hit FRA at which point their benefits will not be reduced for working) and delay their own benefits until 70 without missing as much as a random person. For people still married, they did away with a lot of the tricks that were out there, so if you haven’t yet used them, don’t bother thinking about them.
Also, I should mention that the system of having your benefits reduced if you start taking them while still working theoretically is worked into the calculation of your future benefits. If you have benefits reduced from work, your future benefits are increased based on the same sort of formula that allows the average person to be indifferent as to when to start taking SS.
