Image source: SSA Office of the Inspector General.
Every year, millions of Americans become eligible to receive Social Security benefits for the first time. If you're planning on taking Social Security in 2016, it's important to understand what's involved in getting your benefits started as well as what implications your decision has for your finances throughout retirement. Let's look at the basics you'll need to know about Social Security.
How to apply for Social Security benefits
You can file an application for Social Security retirement benefits once you reach the age of 61 years and nine months. The Social Security Administration recommends that you apply three months before you want your benefits to start in order to provide enough advance time to get your payments set up properly.
In order to apply, you have several options. The easiest is the SSA's online retirement application, which leads you through all of the questions and information you'll need to provide in order to set up your benefits. The SSA says you can complete the online application in as little as 15 minutes. Alternatively, you can call the SSA toll-free at 1-800-772-1213 between the hours of 7 a.m. and 7 p.m. Monday through Friday. You can also visit a local Social Security office in person.
You'll need basic information in order to apply for benefits. That includes your birthdate and place of birth, names of any current or former spouses, and the period during which you were married, names and birthdates of any children who would be eligible for family benefits based on your work history, and dates and details of any military service. You'll also need to provide employment information over the past three years as well as banking information to arrange for direct deposit of your checks.
When to apply for Social Security benefits
You can apply for Social Security retirement benefit at any time once you reach age 62. Yet what many people don't realize is that putting off applying for Social Security for as little as a single month can make your checks a little bit bigger -- at the obvious expense of having to wait longer before you start getting them.
For instance, say you would be entitled to receive $1,333 in monthly Social Security benefits at full retirement age, and you turn 62 on Jan. 1, 2016. If you claim benefits in January, your benefits will be reduced by 25%, and you'll get your first check for $1,000 in February since the SSA pays a given month's benefits in the following month. Each month you wait takes 5/12 of a percentage point off the reduction in your benefits. Therefore, if you wait until December to claim your benefits, the reduction will only be 20.4%, and you'll get monthly checks for $1,061 starting the following month.
There's a trade-off involved in waiting. Claiming in December gets you $61 extra per month, but it cost you 11 potential payments of $1,000. It'll take about 15 years' worth of monthly payments to make up for the upfront loss of benefits, so you have to decide whether waiting is worth it to you and your family.
Claiming decisions based on other family members' work history
Keep in mind that you might be eligible for Social Security benefits based on factors other than your own work history. If your spouse becomes eligible for benefits, then you might be entitled to spousal benefits. Even if you're not yet retirement age, you can get spousal benefits if you're caring for a qualifying child who's under age 16 or receives Social Security disability payments.
If your spouse passes away, you can qualify for survivor benefits. Widows and widowers can claim survivor benefits as early as age 60, and surviving spouses who are disabled can claim benefits between age 50 and 59 as well.
The process for claiming spousal and other family benefits is similar to what you'll need for your own retirement application. You'll need documentation of any special circumstances needed to claim your benefit, such as a death certificate for survivor benefits, but in most respects, the particulars of how you'll make your claim are the same.
Taking Social Security is a key moment for those in or near retirement. By being aware of how and when various types of benefits become available, you'll be prepared to get your Social Security as soon as you want.
