This article was updated on July 31, 2017.
Social Security applicants now have fewer filing options than they had in the past, but there are still some strategies that can help you maximize your benefits for yourself and your loved ones.
The first thing you need to understand about Social Security is that when you file for one type of benefit, such as a spousal benefit, the Social Security Administration will deem you to have filed for every type of benefit for which you're eligible, including spousal, family, or individual benefits. This means that you can no longer file for just one type of benefit if you're eligible to receive at least two types of benefits. It will also begin paying you an amount that is approximately equal to the largest of these benefits unless you opt to suspend your benefits. If you suspend them, then you will not receive payments until a time of your choosing.
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The best solution
Generally, the best choice you can make when it comes to maximizing your Social Security benefits is to wait to file for them until you have reached age 70, when you're eligible to receive the largest monthly benefit amount thanks to delayed-retirement credits. You see, for every year past your full retirement age you delay retirement benefits, your benefit will increase by 8%.
Let's consider the example of a retired worker whose full retirement age is 67. If she's eligible for $2,000 per month at age 67, but she waits until age 70 to file, then she'll boost her Social Security benefits by 24% to $2,480. Now let's consider the impact that extra income could have throughout her retirement. Assuming she lived until age 87 (the average life expectancy for today's 65-year-old women), she would receive $480,000 in lifetime benefits if she claimed Social Security at age 67. By waiting until age 70, she would boost her lifetime benefits to $506,000. While that extra $26,000 isn't exactly a princely sum, every little bit counts when you're living on a fixed income.
Meanwhile, if you are single, or if you are divorced and were married for at least 10 years and do not plan to remarry, then waiting until age 70 is virtually always the best choice. You can collect a spousal benefit once you reach full retirement age and suspend your own benefit until you reach age 70. If you are widowed, then you can collect survivors benefits at age 60 (or 10 years sooner if you are disabled) and suspend your own benefit until age 70, allowing it to accumulate delayed-retirement credits.
All that said, there are some cases in which delaying Social Security is not the best move. If you don't live past your early 80s, then you won't collect enough benefit checks to make up for the years in which you delayed benefits. If your life expectancy is significantly lower than average, then you may even want to claim benefits at the earliest possible age of 62, even though it will mean your benefits are permanently reduced.
If your spouse earns much more than you do, then that's another reason to consider filing early: Collectively, you and your spouse may come out ahead if you claim your benefits early and let your spouse suspend their bigger benefit until age 70, when it will have grown exponentially larger than yours. Lastly, if you have more than enough money to get through retirement in comfort and financial security, then there's no reason not to claim your Social Security benefits early and simply enjoy that extra income while you're young(-ish).
Suspension of benefits and the four-year window
If you were born after Jan. 1, 1954 and you began taking Social Security retirement benefits early, then you can still suspend your benefits when you reach full retirement age and allow them to grow by 8% each year until age 70. However, your spouse will not be able to collect any type of spousal benefit off of your record in the meantime. If you are married and your spouse is at least four years older or younger than you, and the younger of the two of you turned 62 by the end of 2015, then he or she can still file for a full spousal benefit after reaching full retirement age and suspend their own individual benefit until they reach the maximum retirement age.
If you are a divorced spouse who turned 62 before Jan. 1, 2016, then you can still claim spousal benefits based upon your ex-spouse's earnings, even if your ex has elected to suspend their benefits. You can then suspend your own benefit until you have reached the maximum retirement age if you so choose.
Complex issues
If you and/or your spouse does not exactly meet any of the criteria listed here, then you probably need to enlist a professional to help you determine the option that is best for you. Filing for Social Security benefits can be a tricky proposition in many cases, and several factors, such as your job circumstances, other sources of retirement income, and projected longevity, must be considered in order to make the best possible decision. In many cases, you will need to have your advisor run several possible scenarios through a financial-planning program that has been updated with the new filing rules. For more information on Social Security and the filing options that are available for you, visit the Social Security website.
