You have been working most of your adult life and now the time has come to start thinking about retirement. You have been saving for this, but what do you know and how does your Social Security come into play? The Social Security decision you make in your 60s will determine the amount of total income you will receive over your lifetime. If you are married that can complicate things even further. Below are a couple of things to keep in mind when you are preparing to claim Social Security.
Let us start with some definitions:
Primary Insurance Amount (PIA): This is your base monthly benefit. It is computed by the Social Security Administration (SSA) using a complex formula and up to 35 years of your highest annual earnings. You can check your SSA records to confirm your earnings are accurately recorded throughout your working years. This can help ensure the correct amounts will be used for your PIA calculation when the time comes.
Full Retirement Age: This is the age at which you may claim full, unreduced Social Security benefits. Claiming Social Security before full retirement age will cause your benefits to be reduced. Conversely, claiming Social Security after full retirement age will increase your benefits to more than your PIA because you will receive retirement credits for every month you delay the benefits.
The “when to apply” question is very complex and really requires a customized analysis. But here are a few points to remember:
1. The age you file determines your permanent monthly benefit.
2. If you apply early, your benefits start out at some fraction of your PIA and remain at that percentage for the rest of your life. They do not go up to 100% when you reach full retirement age.
3. When you apply impacts survivor benefits as well. One example is if a higher-earning spouse delays taking Social Security until age 70, starts receiving the maximized amounts, and passes away at some point after that, those benefits could transfer to the lower-earning spouse.
Other things that you will need to consider are your health status, life expectancy, income needs, and overall retirement plans when deciding when to claim Social Security benefits. This may feel overwhelming and as if there is a lot to keep in mind – because there is. Schedule a Social Security consult with us today and do not leave this big decision to guess work.