As stated on earlier pages, the amount of your Social Security retirement benefits depends on two things: your average earnings during your highest 35 years of work, and the age at which you choose to start receiving benefits. You can start receiving benefits as early as age 62 and as late as age 70.
You are eligible for full benefits if you file for benefits at full retirement age (FRA), which is between age 65 and 67 depending on when you were born. If you are below FRA, your benefits are decreased by about 8% per year for each year you are below FRA. If you are above FRA, your benefits are increased by about 8% per year.
The current Social Security rules give you some flexibility about when and how to file a claim in order to maximize your benefits. Here are some strategies that apply to common situations.
The most popular age to file for Social Security benefits is 62. But this permanently reduces your benefit by 25% compared to filing at full retirement age. What if you filed early and then want to undo it, perhaps because your circumstances changed? You have a couple of options.
If you are past your FRA when you file for benefits, you are eligible to receive up to six months of retroactive benefits in a lump sum. This means the SSA gives you the benefits you would have received if you had files six months earlier. But keep in mind that this also changes your effective date of filing to six months earlier, so that your benefit is lowered.
For example, suppose you file at age 70, to get the most delayed filing credit. If you take the six months of retroactive benefits, the SSA regards you as having filed at age 69 1/2, so you lose the last six months of delayed credit.
For married couples
(Update: with the budget bill signed in November 2015, the file and suspend strategy is no longer available to new filers and the restricted application strategy is only available to filers born before January 1, 1954.)
If you are or have been married, and are at FRA, you can receive an amount equal to 50% of your spouse’s benefits, based on your spouse’s earnings. If you are below full retirement age (FRA), the amount will be less than 50% of your spouse’s earnings.
In order for you to claim spousal benefits, your spouse must first have filed for their Social Security benefit. What if you want to start receiving spousal benefits now, but your spouse wants to wait in order to get a larger benefit later? This is where the “file and suspend” strategy comes in. Your spouse at FRA can file for benefits, and ask the SSA to suspend paying the benefit until a later time. Then you file a “restricted application” to start receiving spousal benefits. You start receiving an amount equal to 50% of your spouse’s benefits. Meanwhile, your spouse’s benefits continue to accumulate deferral credits until he/she starts receiving them.
Your own benefits continue to accumulate credits as well, since you haven’t filed for them. At a later time, such as age 70, you can stop receiving spousal benefits and file for your own benefits, if that is advantageous for you.
For example, suppose Fred, age 65, is entitled to Social Security benefits of $2000 per month and his wife Freda, also 65, is entitled to $800 per month. Fred can file for benefits and suspend payment, and Freda can file for spousal benefits. This allows Freda to receive half of Fred’s benefits, or $1000 per month. Meanwhile, both Fred’s and Freda’s benefits continue to grow at 8% per year. At age 70, Freda’s benefit will have grown to $1,175 per month. At that time, Freda can file for benefits, since her own benefit is now greater than her $1000 spousal benefit.
You can also implement this strategy with the roles reversed. That is, the lower-earning spouse could file for their benefits, and the higher-earning spouse, when they reach FRA, could then file for spousal benefits based on the lower-earning spouse’s earnings. For example, Freda could file for benefits of $800 per month at age 65, and Fred could submit a restricted application for spousal benefits of $400 per month, half of Freda’s benefits. At age 70, Fred could file for his own benefits, and Freda would continue to receive her $800 per month.
The higher-earning spouse must be at least FRA at the time they file for spousal benefits with this strategy. Also, in order to file for spousal benefits, a person must not have filed for their own benefits in the past. In the last example, Freda could not file for spousal benefits because she had already claimed her own benefits.
If You’re Widowed
If your spouse dies, you are entitled to survivor benefits based on your deceased spouse’s earnings. If your spouse died before claiming benefits, you can receive up to 100% of your spouse’s retirement benefit at their full retirement age. You can claim survivor benefits as early as age 60, but in order to receive the full benefit, you must wait until you reach your FRA. Otherwise, the survivor benefit is reduced for each year you are below your FRA. If you remarry at age 60 or over, your remarriage will not affect your survivor benefits.
If you are also entitled to your own benefits based on your earnings, you can claim survivor benefits first, while allowing your own benefits to accrue credits, and then file for your own benefits later.
If You’re Divorced
If you’re divorced, you can still file for spousal benefits based on your ex-spouse’s earnings. You must have been married for at least 10 years, be divorced for at least two years, be at least age 62 and unmarried, and your spousal benefit must be greater than your own benefit based on your earnings. If you remarry, you cannot apply for spousal benefits from your first spouse’s earnings, unless you get divorced again or your second spouse dies.
You are eligible to apply for spousal benefits even if your ex hasn’t filed for their own benefits, as long as they are age 62 or over. Like other Social Security benefits, you get the full amount (50% of your ex-spouse’s benefits) if you file when you reach FRA.
If your ex-spouse dies, you are eligible for survivor benefits based on their earnings, as long as the marriage lasted 10 years or more. Even if you remarry, this will not affect your survivor benefits, as long as you are age 60 or over when you remarry.
Note that the 10 years do not have to be continuous. That is, you could divorce and then remarry the same person. As long as the remarriage occurs no later than in the calendar year immediately following the year in which the divorce became final, it is considered a continuous marriage for Social Security purposes.
For example, if Fred and Freda married on February 1, 2001, divorced on February 1, 2005, remarried on December 1, 2006, and divorced again on February 1, 2011, the marriage was considered to have lasted 10 years, even though it actually was eight-plus years.
If You’re Single
Even if you’ve never married, the file and suspend strategy might still be advantageous for you. If you delay filing for benefits until age 70, your benefits accrue deferral credits and grow by 8% per year. That means your benefits would be 32% greater after inflation at age 70 than if you received them at age 66.
If you file for benefits at FRA and suspend payment until age 70, you still get the deferral credits. In addition, at any time between FRA and age 70, you can ask the SSA for a lump sum payment equal to all of the benefits you would have received if you’d started receiving them at FRA.
This gives you flexibility. For example, if an emergency came up, or your life circumstances suddenly changed such that you’d rather have a lump sum payment now than increased benefits later, this strategy allows for that. If you had not done a file and suspend at FRA, and later you asked for retroactive payments, the most you could have received was six months’ worth of retroactive payments.
Note that once you receive the lump sum payment, you forfeit all deferral credits, and your Social Security benefits will start monthly at the amount you would have received if you’d claimed them at FRA.
Keep in mind that this also affects the amount your family members, such as former spouses and children, will receive if they claim benefits based on your earnings.
There are other Social Security features and strategies besides the ones described here. For more detail, visit the Social Security Administration (SSA) website. You will also want to consult a qualified attorney or financial adviser to see what tactics apply best to your and your family’s situation.
The SSA website has a collection of benefits calculators here.
Many people have heard that Social Security is underfunded and wonder whether it will be able to pay out benefits when they retire. The next page addresses this question.