If you want your monthly Social Security benefit to be as large as possible, you'll have to wait until age 70 to claim it. But that's not the right choice for everyone -- despite the fact delaying earns you bigger checks.
In fact, there are plenty of circumstances when you'd want to start your retirement benefits much sooner -- even as soon as 62 when you first become eligible. And there's one situation where starting at a younger age absolutely makes sense.
Here's what it is.
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Claim Social Security before 70 in this situation
The single best reason to claim Social Security well before age 70 is if your claim for benefits enables a higher earning spouse to delay their claim for benefits.
Say you're married and you and your spouse want to retire, but you need some money from Social Security to make that happen. If your spouse earned more than you, it would make sense for you to claim your benefits and let them wait to start theirs.
Why it's a good idea to claim Social Security before 70 to allow a higher earner to delay
There are several reasons it makes sense to start your benefit long before 70 to enable a higher-earning spouse to delay.
- Delaying a higher benefit has a bigger payoff
Early filing penalties and delayed retirement credits are both applied on a percentage basis. That means the larger your benefit, the bigger the impact of early or late filing.
Say your standard benefit is $800 per month and your spouse's standard benefit is $1,700 per month.
- If you claim early and are subject to a 25% early filing penalty, your benefit shrinks by $200 per month.
- If your spouse claimed early, that same 25% penalty would result in a $425 benefit reduction.
Likewise, delayed retirement credits applicable after hitting full retirement age are also applied on a percentage basis.
If you pass up the opportunity to earn a 24% benefit boost, you give up the chance to raise your checks by $192. But your higher-earning spouse gives up the chance to earn a $408 boost.
- You can maximize your survivor benefits
When one spouse dies, the surviving spouse gets to keep the higher of the two benefits. It pays off to enable your higher-earning spouse to put off claiming their checks to raise their benefits -- even if that means claiming yours early.
By taking this approach, if your spouse dies first, you get more money to live on. This could really come in handy since widowhood can be a huge financial shock.
- Your benefits could go up later
Typically, you have a choice of claiming benefits based on your own work record or claiming spousal benefits based on your spouse's work history. However, if your spouse hasn't yet filed for their benefits, you can't start your spousal benefits until they do.
But you can start getting your own checks to help support both of you. Then, when your spouse does file and you become eligible for spousal benefits, you can switch to them (instead of continuing to collect your own benefit) if it makes financial sense.
If this is an option for you, the hit you took to your benefits won't be as damaging to your long-term finances since you'll eventually be making a switch to spousal benefits anyway.
There are clearly plenty of advantages to starting Social Security well before 70 if doing so enables a higher-earning spouse to delay. That's why it's so important to coordinate with your partner if you're married so you can get the most combined lifetime income from the Social Security system.
