Picking the right time to claim your Social Security benefits (be they basic retirement, spousal, or survivors benefits) can provide a huge boost to your retirement income. For most people, the best way to decide when to claim Social Security is to figure out which option will result in the highest lifetime benefits amount. Let's compare two imaginary retirees -- call them Fred and Betty -- to see how to choose the best time for claiming your benefits.
Fred's base benefit amount (what he'd get if he claimed them at full retirement age) is $1,500 per month; Betty's base benefit amount is $1,800. Betty's in poor health and so she doesn't think she'll live past 70, while Fred is in excellent health and, based on family history, can expect to live to 90.
Before full retirement age
If you claim your social to security benefits between age 62 and your full retirement age, your benefits will be reduced based on how early you claimed them. However, claiming early may still be the best choice if it results in the highest lifetime benefits.
Social Security's full retirement age is based on the average lifespan (for example, a man turning 65 in 2017 is predicted by Social Security to live until age 84.3). Thus, if you expect to have a shorter-than-average lifespan because you are in poor health or come from a short-lived family, you would get a higher lifetime benefit from choosing to claim Social Security benefits early. Check out this nifty Social Security breakeven analysis (at the end of the linked article) for a visual explanation of how this works.
Compare how it would work for Fred and Betty to claim Social Security benefits at 62. Both have a full retirement age of 67, so claiming at age 62 reduces their benefits checks by 30%. That means Fred will receive just $1,050 per month, while Betty will get $1,260 per month. By claiming at 62 (assuming he really does live until age 90), Fred will get a total of $352,800 in benefits.
Betty, on the other hand, expects to live only until age 70. If she claims her benefits at age 62, she'll get a lifetime total of $120,960 in Social Security benefits. But if she waits to claim them until age 67 and gets her full $1,800 per month, her lifetime benefits will be just $64,000 -- so claiming those benefits as early as possible is a much better deal for her.
There can also be other factors that would make claiming your benefits early a wise decision. For example, if you need the money now, go ahead and claim your benefits – it's not worth starving for five years just to get a few extra dollars per month in the future.
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At full retirement age
If you claim Social Security at full retirement age, you'll get your base benefit amount – no penalties, but no delayed retirement credits either. This can be a good choice if you're ready to retire at this point and need that benefits income to live comfortably. For example, your health may make it difficult for you to continue working full time, or you may be subject to forced retirement by your employer. Claiming Social Security at full retirement age will maximize your lifetime benefits if you live about as long as the actuaries predict.
In Fred's case, waiting to claim his benefits until 67 would get him his full $1,500 per month, resulting in a lifetime total of $414,000. That's substantially better than the $352,800 in lifetime benefits he'd get from claiming them at age 62. As for Betty, if she waits to claim her benefits until age 67 and gets her full $1,800 per month, her lifetime benefits will be just $64,000 -- much less than the lifetime total of $120,960 she'd get at age 62.
After full retirement age
Waiting until after your full retirement age to collect Social Security benefits means you get delayed retirement credits added to your account. These credits will increase your benefits checks once you do start to get them. However, there's a limit to how many credits you can accrue – once you turn 70, the credits stop coming, so it doesn't make sense to wait longer than that.
Returning to the example of Fred and Betty, if Fred waits until age 70 to claim his benefits, then his delayed retirement credits will increase his benefits checks by 24% of the base amount, resulting in a monthly payment of $1,860. Claiming Social Security at 70 would thus result in a lifetime benefit total of $446,400. Since claiming at age 67 would get Fred a lifetime benefit of just $414,000, the wait until age 70 would be well worth it for him.
On the other hand, since poor Betty expects to die at age 70, waiting until them would get her almost nothing from Social Security. It's obvious that in her case, the wise move is to claim those benefits as early as possible.
Claiming Social Security at age 70 will result in the highest possible benefit check, and if you are fortunate enough to be long-lived, it will also result in the biggest lifetime benefits. So if you're optimistic about your health and probable lifespan – and can afford to do so – wait until age 70 to claim your benefits.
How to claim your benefits
You've thought about all the factors affecting when to claim Social Security benefits, and you've decided that the best time to claim is right now. So how do you do it?
There are three possible ways to enroll in Social Security. First, you can sign up online using the Social Security website's Benefit Application. Second, you can enroll over the phone – as of this writing, you can reach the correct Social Security department at 1-800-772-1213 (TTY users can call 1-800-325-0778). And third, you can make an appointment at your local Social Security office.
Whichever enrollment option you choose, it's a good idea to look over the Social Security application checklist first to make sure that you have all the information and documents you need to apply. Doing so can save you a lot of time and inconvenience, especially if you've chosen to apply in person at a local Social Security office.
If you choose to wait until after 65 to claim your Social Security benefits, it's extremely important that you remember to apply for Medicare the year you turn 65. If you miss your initial enrollment period for Medicare, you could face a number of unpleasant penalties, including some that will dog you for the rest of your life. So save yourself a lot of hassle by claiming Medicare in a timely fashion, and save yourself a lot of money by waiting until just the right moment to claim Social Security benefits.
