Don’t Settle For The Smallest Social Security Benefit

older couple park benchCouples can take advantage of different timing strategies for claiming Social Security benefits.

Do you know which strategies will generate the highest lifetime benefits, and which will generate the lowest?

Christine Fahlund, a senior financial planner with mutual fund company T. Rowe Price Group, spoke to Wall Street Journal reporter Kelly Greene about which strategies are the best and worst.

Here’s the worst:

“Most married couples take benefits as soon as they can—at age 62,” said Fahlund.  “That ensures that they will get the smallest Social Security benefits for which they are eligible.”

And the best:

“The highest annual payout,” explains Fahlund, “is to wait until both members of a couple turn 70.”

And a good compromise:

Some couples decide to take Social Security as early as possible because they fear they won’t live long enough to benefit from delaying, while others opt for early benefits because they don’t have other funds to draw on while waiting.

But there’s a better way for them to get higher benefits without waiting until age 70. It’s called a “split strategy.”

In a typical example, the lower earner takes Social Security at age 62 (the youngest age you can claim), while the higher earner opts for spousal benefits at age 66. Then, at age 70, the higher earner switches to his or her own maximized benefit.

This ensures bigger lifetime benefits for the couple, plus, it results in maximum benefits for the longest-living spouse. In an example provided by T. Rowe Price’s Fahlund, the widow or widower using a split strategy would receive almost twice the Social Security benefits each year ($39,000 instead of $22,000) compared to claiming benefits early at age 62.

The takeaway: Don’t apply for Social Security without asking us to run a comparison of different strategies. That way, you can make an intelligent choice with all the facts in hand.

Want more details? Read Kelly Greene, Social Security: Wait or Not?, The Wall Street Journal, January 4, 2014


About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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