Whether you're married or single, the one thing I would advise people to do before claiming Social Security benefits is to consider the timing. I'm not saying everyone should wait until 70, or that 62 is the best time to make your claim. I'm saying that you want to think several steps ahead -- to death.
Specifically, you need to consider the financial impact on your current (or future) spouse if you die before them. You'll also want to think about your financial situation if your spouse predeceases you.
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Different relationships, different scenarios
If you fall into one of these three categories, thinking ahead is critical:
- Married: Let's say you've been married to the same person for years, but since you've always earned more money than they have, your Social Security benefits at full retirement age (FRA) will be higher. For that reason, your spouse has decided to claim Social Security spousal benefits.
- Single: On the other hand, imagine you're single but hope to marry. If you marry (or remarry), it's possible that your new spouse will want to claim spousal benefits.
- Divorced: If you were married for at least 10 years before you divorced, your ex has a right to claim benefits based on your work record. If your ex does claim spousal benefits, it won't impact your benefits or the amount you receive.
Who can claim spousal benefits?
Here's what it takes for someone to claim spousal benefits:
- You must be married for at least one year.
- You must be age 62 or older unless you're caring for a qualifying child. A "qualifying child" is under the age of 16 and receiving Social Security disability benefits.
- You can't be entitled to a larger benefit based on your own work history.
Since you can't see the future, you need a plan
The most a person can collect under spousal benefits is one-half of the amount you receive at FRA. For example, if you collect $2,400 at FRA, your spouse or ex-spouse is eligible for up to $1,200 per month. Whether you're married or not, consider what would happen if your household collected your benefits plus a spouse's benefits. In this illustration, you're bringing in $3,600 per month in benefits ($2,400 + $1,200). But what happens when one of you dies?
Following the death of one spouse
Let's say one of you dies before the other. The Social Security Administration (SSA) won't keep sending $3,600 monthly. Instead, it will stop paying the lower of the two checks. In this scenario, that's $1,200.
In that case, instead of having that $3,600 per month to work with, you or your spouse will have only $2,400.
Paying the bills
If you haven't done so yet, create a monthly budget based on the remaining Social Security payment and any other sources of retirement income you have. Your budget will dictate your best move.
In the event the new monthly total won't cover the bills, you may consider working longer, as your benefits max out at age 70. Granted, the spousal benefit tops out at 50% your benefit at FRA, but waiting can still help.
How waiting may help
Your Social Security benefits increase by 8% for every year you wait after FRA (up to age 70). If your FRA is 67, your checks will be 24% higher than they would have been if you had claimed at 67. Instead of $2,400 per month, you'd receive $2,976 monthly.
Then, when one of you passes away, the other is left with the larger of the two Social Security payments. By waiting until age 70, that person will have $2,976 to work with instead of $2,400 per month.
If you work your budget and realize that you have plenty of money coming in from other sources to cover your bills, waiting may not be quite so critical. However, if the remaining spouse will barely be able to scrape by on one check, you'll need to work longer, take on a part-time job to make up the difference, invest more while you're working, or a combination of the three.
