Maximizing Social Security Benefits

Social Security is a key source of retirement income for many of us. One of the challenges of retirement is figuring out how to maximize our income streams to ensure we have access to the resources we need throughout our lifetimes. In the case of Social Security, there are a number of steps you can take to make sure that you—and your spouse—are receiving the maximum benefits for your situation.

When to claim benefits

When to claim benefits is often the most important decision retirees make about Social Security.

For most people, eligibility for retirement benefits starts at age 62. However, filing as early as possible will result in you receiving the lowest initial benefits. Each year that you wait to claim Social Security will result in a higher initial benefit.

Your full retirement age (FRA) is the point at which you receive your full initial benefit. Your FRA is determined by your birth year.¹

• For those born in 1958 your FRA is 66 and 8 months
• For those born in 1959 your FRA is 66 and 10 months
• For those born in 1960 or later your FRA is 67

However, waiting beyond your FRA to claim Social Security will result in even larger initial benefits, with the maximum initial benefit occurring for those who claim at age 70, which is the latest you can claim it.

For example, if your FRA is 67, your initial retirement benefit would be 30% lower if you were to claim at age 62. On the other hand, claiming past your FRA results in a benefit that is 8% higher on an annual basis for each month you wait to claim.

Does that mean you should wait until 70 to claim benefits? That depends on a number of factors, including whether you can work or rely on other income streams until then, how long your family typically lives, and how you’d like to spend your golden years. The goal is to maximize Social Security benefits within the context of your life.

But, deciding when isn’t the only way to maximize your benefits.

Preparing

There are steps you can take before you retire—even close to retirement—to make sure that you’re maximizing your benefits.

Maximize earnings

Maximizing Social Security means maximizing your benefits as much as possible before you retire. Your Social Security benefits are based on your top 35 earning years over the course of your working life; if you don’t have 35 years of earnings, then any missing years under the 35 year total will be counted as zero when the Social Security Administration uses your earnings to calculate your benefits amount.

If you haven’t had 35 years of earnings and you’re still working, it might make sense to delay claiming your benefits until you hit 35 years of earnings—as long as you’re younger than 70.

If you continue to work after claiming your benefits, any subsequent earning years that rank as one of your top 35 will serve to increase your benefits moving forward. You’ll see these increased benefits in each subsequent year, in addition to the cost of living increase.

Review your Social Security statement

The Social Security Administration will send you a statement each year outlining the earnings they believe you’ve had over your working life. Because the top 35 years of your earnings are used to calculate your benefits, make sure to review your earnings record for accuracy. If something is awry, you can report any discrepancies to the Social Security Administration.

You may receive the statement in the mail, and it’s also easy to get a copy of your Social Security statement by signing up on the Social Security site.

Maximizing your retirement

Once you’re planning for or in retirement, there are a few more steps you can take to maximize your and your household’s income from Social Security.

Claim spousal benefits  

If one spouse’s earnings have been significantly less than the other spouses’, claiming a spousal benefit might be the best option to maximize benefits—because the spousal benefits could be as high as 50% of the higher-earning spouse’s benefit amount at their full retirement age (FRA).²

• Even if one spouse has earned little or no income over their working life, they can still be eligible to claim spousal benefits.
• The lower-earning spouse must wait until the higher-earning spouse claims their own benefits in order to be eligible for spousal benefits.
• Spousal benefits can be claimed as early as age 62, but you’ll get the maximum spousal benefits by waiting until the higher-earning spouse hits their FRA. For example, claiming at age 62 would reduce the spousal benefit amount to just 32.5% of the higher-earning spouse’s benefit for someone whose FRA is 67.
• If the lower-earning spouse claims their own benefits first, they can switch to the higher spousal benefits once the higher-earning spouse claims their benefits.
• There is no advantage for the spouse claiming spousal benefits to wait until past their FRA to claim, as there is no increase in the benefits amount from that point forward (unless their spouse has not claimed their benefits yet).

If you’re divorced and you were the lower-earning spouse, you can claim benefits on your ex-spouse’s earnings record if:³

• You were married to your ex-spouse for at least 10 consecutive years.
• Both you and your ex-spouse are at least age 62.
• You aren’t remarried.
• You’ve been divorced for at least two years, or your ex-spouse must already have claimed their Social Security benefits.

The maximum benefit from an ex-spouse’s earnings record is 50% of their benefit amount. In order to collect the maximum as an ex-spouse, you must wait until your FRA to claim.

If you remarry, you’ll lose the ability to collect benefits from your ex-spouse’s record. However, if the new marriage ends in death or divorce, you’ll be able to collect benefits based on either marriage, depending upon which benefit is larger.

Claim benefits as a surviving spouse⁴

A surviving spouse can collect 100% of a deceased spouse’s benefits if the surviving spouse has reached their FRA. The survivor’s benefits will be lower if the deceased spouse had claimed before reaching their FRA.

If you were already receiving spousal benefits at the time of your spouse’s death, Social Security will generally switch your benefits to a survivor’s benefit automatically, once they learn of the death. Otherwise you’ll need to contact Social Security to apply for survivor’s benefits.

Generally, a widow or widower qualifies for survivor’s benefits if they are at least 60 years old and had been married to the deceased spouse for at least nine months at the time of their death, although there are exceptions to this requirement if the deceased spouse’s death was accidental or occurred in the line of military duty.

Those who are disabled can generally apply as early as age 50, and there are no age requirements if the surviving spouse is caring for a child from their marriage to the deceased spouse who is 16 or under or disabled.

Couples planning to maximize survivor’s benefits

A strategy that many married couples use to maximize survivor’s benefits, as well as lifetime benefits, is to have the higher-earning spouse wait as long as possible to claim their benefits, while having the lower-earning spouse claim their benefits earlier.

In the case of the higher-earning spouse, waiting to claim as late as possible, including until their maximum initial benefit level at age 70, provides that spouse with larger benefits during their lifetime. Additionally, this also provides the lower-earning spouse with the largest possible survivor’s benefit in the event the higher-earning spouse dies first.

Moreover, having the lower-earning spouse file early provides a stream of income early on in retirement. The age at which this spouse actually files will depend on a number of factors, including whether this spouse is working. The best strategy for each couple will vary based on that couple’s unique situation, but in general, this strategy can provide income during the early years of retirement and lifetime benefits security for the lower-earning spouse throughout their lifetime.

Next steps

As a key part of the retirement income stream for most people, maximizing Social Security benefits makes sense. It takes planning and analysis, depending on your overall financial and life situation, to ensure you are taking the most beneficial path for you.

Because each person’s situation is unique, your Wealth Advisor can offer guidance in helping you decide when it would be best for each spouse to claim their benefits.