Unfortunately, we're not all blessed with good health going into retirement. If you're in your early 60s and are already experiencing a host of health issues, you may be convinced you won't end up living a very long life. And that could prompt you to claim Social Security early.
You're allowed to start receiving Social Security benefits at any age starting at 62. You won't be in line for your full monthly benefits based on your wage history, however, under full retirement age (FRA) arrives. That age is either 66, 67, or somewhere in the middle, depending on your year of birth.
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You also get the option to delay your Social Security filing past FRA and boost your benefits in the process. Your benefits will grow by 8% for each year you postpone your filing, up until age 70.
By contrast, filing for benefits before FRA will reduce them by about 6.67% a year for the first three years you claim them early, and 5% a year after that. So if you're looking at an FRA of 67 but you claim benefits at the earliest possible filing age of 62, you'll be looking at a permanent 30% reduction.
Now you'll often hear that filing for Social Security early makes sense when your health is poor and your life expectancy is limited. Doing so might mean getting less from the program on a monthly basis, but more on a lifetime basis.
That logic holds up nicely if you're claiming benefits only on your own behalf. But if you have a spouse you expect to outlive you, then you may want to file at a later age for your spouse's benefit.
When you're looking out for your life partner
Social Security doesn't just pay benefits to eligible retirees. It also takes care of their surviving spouses after they pass.
If your health is poor but your spouse's health isn't, he or she might end up outliving you by many years. And if you don't claim your benefits early, you might leave your spouse with a higher income stream for the rest of his or her life.
Once you pass away, your spouse will be entitled to a monthly Social Security survivors benefit equal to whatever amount you collected while you were alive. Now, let's say you're eligible for a $2,000 monthly benefit at an FRA of 67 based on your earnings history. If you file at 62 instead, you'll reduce your benefit to $1,400 a month.
You might end up with more lifetime income from Social Security if you file early rather than wait. But what if you pass away at age 70, and your spouse, who's the same age, lives until 90? At that point, a lower survivors benefit might really hurt your spouse financially. So it could pay to avoid claiming Social Security too early for the sake of your spouse -- especially if you don't have much in the way of shared retirement savings to fall back on.
A decision to make together
You may be inclined to hold off on claiming Social Security early for the sake of your spouse -- or not. But before you make any sort of filing decision, sit down with your partner and have a conversation about it.
It may be that your spouse wants you to file early so you can enjoy some of your Social Security income while you're still alive, and so you can get access to better healthcare that makes you more comfortable. Or, your spouse might appreciate your delaying your filing so he or she doesn't have to worry about paying the bills in your absence.
Either way, the decision to claim Social Security is a big one. So if you're sharing a life with someone else, it's important to make that choice jointly.
