Many people take Social Security as early as possible, choosing not to wait several years longer to reach the current full retirement age of between 66 and 67 years old. For some, the decision is motivated by necessity, especially in light of the current retirement savings crisis that has millions of Americans financial unprepared for the demands of post-work living. Yet beyond simply having to have money to cover living expenses, there are some situations in which claiming early actually produces more money from Social Security than waiting would. Many of them involve couples who plan together in order to maximize their total lifetime benefits. Below, we'll go through what your claiming decision can allow your family to do in three of those situations. That should give you an idea of what you should look at as you consider your own decision on when to claim Social Security.
1. To make it possible for your spouse to get bigger Social Security benefits
Two-earner families have an opportunity to use an early claiming strategy to maximize total benefits while getting the income they need early in retirement. In this scenario, the lower-earning spouse claims retirement benefits early, accepting a smaller monthly payment in exchange for getting those payments sooner. Meanwhile, the higher-earning spouse delays retirement benefits, allowing them to grow and earn delayed retirement credits that can dramatically increase total monthly payments.
This strategy can have two positive impacts. First, it allows the higher-earning spouse to maximize benefits, which can pay off dramatically in the long run. Second, the lower-earning spouse can sometimes get a larger payment down the road once the higher-earning spouse claims if spousal benefits exceed the lower-earner's own retirement benefits. All told, having one spouse claim early can be a great way to make ends meet while waiting for a bigger payoff down the road.
2. To activate spousal and children's benefits on your work history
Conversely, in one-earner families, claiming early can be the only way that other family members get access to Social Security benefits. Social Security laws have recently changed, and so it's now required that in order to pay spousal or children's benefits to family members, a worker must have filed for retirement benefits on the worker's own work history.
There are two situations in which this is most important. The first is one in which the nonworking spouse is older than the working spouse, as claiming can activate full-retirement-age spousal benefits for the nonworking spouse. The other involves children who are eligible for benefits, as they can typically receive payments only until they turn 18 or leave high school, whichever is later. In these cases, the best move is often to claim early and let your family get some benefits now.
3. For a surviving spouse to maximize survivor benefits
Much of the time, Social Security requires you to claim all your eligible benefits at the same time. For instance, if you qualify for both retirement benefits under your own work record and spousal benefits based on your spouse's work, then the Social Security Administration will generally deem you to have applied for both at the same time. That gives you whichever amount would have been greater.
However, there's still one situation in which you can claim your own Social Security benefits while leaving open the potential for a different benefit later. If your spouse has passed away, you can claim retirement benefits while deferring survivor benefits until you reach full retirement age. You'll get a reduced payment for claiming your own benefits early, but later on, you can change over to take your survivor benefit. That will increase your check size later on, and in the interim, you'll get at least some money while you wait.
Be smart about Social Security
It's never easy to decide when to claim Social Security, and many people are convinced that the smarter thing to do is to wait as long as you can. Yet in situations like the ones described above, you should strongly consider bucking the conventional wisdom and looking seriously at claiming earlier rather than later.