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Social Security: 3 Things That Affect When You Should Apply

By Dan Caplinger – May 7, 2018 at 9:33PM

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The last is arguably the most important.

Everybody wants as much from Social Security as they can get, and when you apply to start getting retirement benefits makes a huge difference in how much your monthly payments will be. Yet most people take a broader approach, seeking not just to maximize their check size but rather to ensure that they get as much as possible over their entire lifetimes.

Several factors go into smart decisions about when to take Social Security, but three things in particular have a dramatic impact on how helpful the program will be for you and your family. Be sure to take them into account, and you'll be much more likely to reap the true rewards that Social Security can offer.

Three Social Security cards spread out with a brass key on top.

Image source: Getty Images.

1. Your family status

The decisions that you make about Social Security can affect not just your finances. Depending on your family status, your spouse and children can also have something at stake when you decide when to take your Social Security benefits. In particular, when you claim Social Security affects that your surviving spouse will receive after your death, as well as any survivor benefits that your children might be entitled to get. In general, the longer you wait, the greater your monthly payments will be -- and that makes the survivor benefits that your loved ones will receive after your death grow as well.

If you're single without any eligible children, then the decision is a lot simpler: You can just focus on your own financial situation. If you're married, though, you might well find that what looks like the best decision when you look only at your own point of view becomes the wrong decision when you take your spouse into consideration. Only by looking at the complete picture will you have all the information you need to make a truly informed choice.

2. Your (and your spouse's) life expectancy

Social Security retirement benefits get reduced if you take them early and are augmented if you wait beyond full retirement age to take them. In general, the Social Security Administration sets up the amount of those reductions and enhancements to account for a typical life expectancy, so that those with an average life-span can expect to get roughly the same amount regardless.

That creates planning opportunities for those who aren't of average health. If you expect to live well beyond what an insurance company's actuarial tables would say is usual for someone of your age, then waiting beyond full retirement age can pay off with larger monthly payments for a greater period of time. If your health is poor, then claiming early ensures that you'll get as many payments as possible early in your retirement -- even if it means accepting dramatically lower payments. As we saw in the first point above, if you're married, taking your spouse's life expectancy into account as well as important to give you the right answer for your entire family.

3. Your other financial resources

Social Security was never meant to be your only source of retirement income, and those who've successfully saved a sizable nest egg have greater flexibility with Social Security than those who haven't. If you'll rely almost entirely on Social Security, then you generally have to take it as soon as you stop getting income from work. That limits your ability to do smart planning.

If you have other savings, you can choose to delay Social Security benefits even after you've quit working, spending down employer-sponsored retirement accounts and other tax-favored assets first. Yet the right strategy can vary even if you have substantial savings. For those who value the tax benefits of their retirement accounts as much as possible, using Social Security to pay for living expenses while keeping more of your investment assets growing can be a winning strategy. Factors like your tax rate, the nature of your retirement accounts, and the type of other income you have access to will all play a role in deciding when the ideal age to claim is.

Be smart

Social Security is vital, so you can't afford to get it wrong. Take these three things into account when you're considering making your initial claim for Social Security benefits, and you'll be a lot happier about the way your retirement turns out in the long run.


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