By now, many of us have heard about changes to Social Security claiming strategies resulting from the Bipartisan Budget Agreement of 2015. These changes may impact when and how you claim your Social Security benefits, but it’s also important to recognize that many key factors remain unchanged:
- You can still suspend your Social Security benefits at Full Retirement Age (FRA) and earn Delayed Retirement Credits (DRCs) plus cost of living adjustments (COLAs).
- DRCs remain 8%. Delaying claiming your own work record Social Security benefit beyond your FRA will increase your FRA benefit by 8% per year each year until you turn 70. Although this is “simple interest,” the fact remains, you will receive a benefit that is 76% higher at age 70 than at age 62.
- For married couples, the higher of the two work record benefits will be the amount paid out until the second spouse passes away. Therefore, if you are the breadwinner and take a reduced benefit, your spouse will receive reduced benefits should you pass away first. Conversely, if you wait and take a larger benefit, you will pass a larger benefit along to your surviving spouse.
- Surviving widows and widowers still have access to their own benefit as well as a benefit from their deceased spouse. Social Security allows surviving spouses to take one benefit and switch to the other later on.
- You still have the first 12 months after making a Social Security claiming decision to change your mind, pay it all back – interest free – and make a potentially more beneficial claiming decision later on.
- If you were born on January 1, 1954 or earlier, you can still leverage spousal, and in some cases, ex-spousal benefits using a restricted application. (Ask for a copy of “Key to Maximizing Lifetime Social Security Benefits” for more information on the Restricted Application Strategy.)
Generally speaking, the earlier you claim their Social Security benefits, the less you will receive over your lifetime. The longer you wait to collect, the more you will receive in total lifetime benefits.
Finally, longevity is the risk you should be considering when making a Social Security claiming decision, not mortality. Many of us approach the Social Security claiming decision thinking that if something were to happen to us, we might not receive much, if anything, back from the program we have paid so much into. Although this would certainly be unfortunate, and mortality is a risk we all face, the greatest risk to your retirement is that you live a long, robust, and healthy life through your eighties, into your nineties and beyond!
Be sure to ask your Stifel Financial Advisor for a copy of our “Summary of Social Security Reform” flyer, which details the changes resulting from the legislation.