Why Claiming Social Security Early Could Be a Smart Move

Social Security is a key source of income for many retirees, but deciding when to claim it can be tricky. You can start your benefits as early as 62 or as late as 70, and the longer you wait, the bigger your monthly checks will be. However, waiting until 70 is not always the best option, especially if you have a spouse who earns more than you. In this article, we will explain why claiming Social Security early could be a smart move for some couples.

The Trade-Off Between Time and Money

When you claim Social Security, you face a trade-off between time and money. The earlier you claim, the more checks you will receive, but the smaller they will be. The later you claim, the fewer checks you will receive, but the larger they will be.

Social Security
Social Security

This trade-off is based on the concept of the “breakeven age”, which is the age at which you would receive the same total amount of money whether you claimed early or late. For example, if you claim at 62, your breakeven age with claiming at 70 would be around 80. That means that if you live past 80, you would have been better off waiting until 70, and if you die before 80, you would have been better off claiming at 62.

However, the breakeven age is not the only factor to consider when deciding when to claim Social Security. You also need to think about how you will use the money, and how much enjoyment you will get from it.

The Benefit of Claiming Early to Let Your Spouse Delay

The best reason to claim Social Security early is if your claim allows your higher-earning spouse to delay their claim. This strategy has several benefits, such as:

  • Maximizing your survivor benefits: When one spouse dies, the surviving spouse can keep the higher of the two benefits. By letting your higher-earning spouse delay their claim, you increase the amount of money they will receive, and thus the amount of money you will receive if they die before you.
  • Increasing the payoff of delaying a higher benefit: The early filing penalty and the delayed retirement credit are both applied on a percentage basis. That means that the larger your benefit, the bigger the impact of claiming early or late. For example, if your benefit is $800 per month and your spouse’s benefit is $1,700 per month, claiming early would reduce your benefit by $200 per month, while claiming late would increase your spouse’s benefit by $408 per month. Clearly, the payoff of delaying a higher benefit is much greater than the cost of claiming a lower benefit early.
  • Enjoying your money while you can: Claiming Social Security early gives you more money to spend in your 60s and 70s, when you are likely to be more active and healthy. You can use the money to travel, pursue your hobbies, or spoil your grandchildren. Waiting until 70 may give you more money in your 80s and 90s, but you may not be able to enjoy it as much, or you may not even live that long.

How to Make the Most of Your Social Security Benefits

Claiming Social Security early to let your spouse delay their claim is a smart move for some couples, but it may not work for everyone. You need to consider your own financial situation, life expectancy, and personal preferences. You also need to have a solid retirement plan that covers your expenses, including healthcare, taxes, and inflation.

If you need help with your Social Security decision, you can consult a financial planner, use an online calculator, or visit the Social Security website. The more informed you are, the better you can make the most of your Social Security benefits.

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