Most Americans tap into their Social Security benefits as soon as they can, with the earliest possible age of 62 remaining the most common age to claim Social Security, according to the Government Accountability Office. For some, waiting any longer than necessary to claim Social Security benefits isn't always a desirable option, whether they need that additional income or simply want some extra spending money while they have more time to enjoy it. But for spouses considering how best to maximize their lifetime benefits -- both from their own work history and from spousal benefits they might be entitled to -- it's important to understand why 66 can be a prime age to claim Social Security.
The beauty of Social Security spousal benefits
Being married opens up a wealth of Social Security strategies that can help you take advantage of claiming options that single retirees don't have. Specifically, the decision that spouses have to make is when to claim benefits based on their own work histories and when to claim spousal benefits.
In general, the base amount of a spousal benefit is equal to half of what your spouse receives as a regular retirement benefit. So based on your work history and your spouse's work history, you can get a good sense of which one will provide you more in benefits.
Obviously, the best of all worlds from a Social Security standpoint would be to double-dip from both types of benefits. Unfortunately, you're not entitled to take both your own retirement benefit and a spousal benefit. But under certain circumstances, you can time when you take each benefit in a way that maximizes the total you receive over your lifetime -- and that's where age 66 plays such a key role.
Why does 66 matter so much for spousal benefits?
The reason 66 is such a key age is that it currently marks what the Social Security Administration calls "full retirement age." For spousal benefits, whether you claim before or after full retirement age has a huge impact on your future options.
If you claim spousal benefits before turning 66, then you're not allowed to claim only your spousal benefit. Instead, the Social Security Administration will treat you as if you've also claimed your own retirement benefit based on own work history. The result will be that you'll receive a monthly check for whichever is the greater of the two, composed of your own retirement benefit plus a possible excess spousal benefit to make up the difference if it's larger. The benefit will also be reduced to reflect your early claiming age.
If you wait until age 66 before claiming a spousal benefit, though, then you can use what's called a restricted application to receive only that spousal benefit. By doing so, you can let your own retirement benefit continue to grow, earning delayed retirement credits that could boost your eventual monthly payment by as much as 32% by age 70.
Social Security: What a difference a month makes
There has been much debate regarding whether it's smarter to claim Social Security as early as possible or to wait until full retirement age or later. But for spousal benefit purposes, you can see the difference that even a single month makes.
A simple example shows how big a difference your 66th birthday makes. Say your monthly retirement benefit based on your own work history is $950. Your spouse has already claimed Social Security and receives $2,000 per month, making your monthly spousal benefit $1,000.
If you claim spousal benefits the month before you turn 66, you'll be deemed to have filed for your own retirement benefit as well. You'll receive $945 for your own benefit ($950 reduced by one month's early-retirement penalty) plus $52 in excess spousal benefits for a total of $997. More importantly, you won't have the option to switch to your own retirement benefit later, because Social Security will treat you as already having claimed it.
If you claim after you turn 66, you can choose simply to receive the spousal benefit of $1,000. You can continue to receive that amount while letting your own retirement benefit grow. When you turn 70, you can claim your own retirement benefit, and the extra 32% in delayed-retirement credits will mean that you'll receive $1,254 monthly -- that's about 25% more than your spousal benefit, for the rest of your life, all because you waited that single month.
Obviously, this example isn't the most realistic. If you've waited until age 65 and 11 months, it's easy to wait another month to hit 66. But the example illustrates just how large an impact your 66th birthday can have on your overall benefits.
Moreover, the way spousal benefits interact with your regular retirement benefits depends a lot on how those numbers compare and what decisions your spouse might already have made about claiming benefits. In some cases, waiting until age 66 doesn't have nearly the positive impact as it does in the example above, especially for those whose own retirement benefit is small compared to their spousal benefit.
Spousal benefits are one of the most complicated aspects of Social Security. But if you keep in mind how important turning 66 can be for your planning, you'll see why planning out a long-term Social Security strategy before you claim early benefits can help you maximize what you and your spouse receive.
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