Knowing the ins and outs of various Social Security strategies is important to make the most of the program for you as an individual and for your family. Questions about making the right financial moves and investing are usually not followed by questions about Social Security. However, they should be. A recent article from CNBC titled “Social Security may be a ‘treasure trove’ for you and your family. But first you have to navigate some complex rules” explains how Social Security includes thirteen different kinds of benefits.
The list of different payments includes disability benefits, spousal benefits, divorced spousal benefits, child-in-care spousal benefits, widow/widower benefits, child benefits, disabled child benefits, mother/father benefits, divorced widow/widower benefits, parent benefits, grandchild benefits and death benefits.
Each type of benefit has its own requirements. The one catch: Social Security is a “use it or lose it” system. If you do not know you are eligible for a benefit, you might miss it.
One basic fact: you can wait until age 70 to get the maximum benefit. However, there is no advantage to delaying taking Social Security benefits past age 70. Eligibility begins at age 62, and for each year you collect benefits before your Full Retirement Age (FRA), you lose about 7%. FRA is based on your date of birth. Therefore, if you can wait to collect at your FRA, you will get 100% of your benefits. For every year past FRA, benefits increase by about 8%.
If you can wait from age 62 to 70, your benefits will be about 76% higher. Most people do not wait because they need the income or have serious health conditions and do not expect to live long enough to benefit from the increase.
For some families, maximizing the benefits is less about the wage earner and more about the family. If the wage earner has a disabled child, claiming benefits could trigger the child-in-care spousal benefit and a disabled child benefit. In this case, it may be better to take benefits earlier to help the entire family.
Another advantage of waiting until age 70 is it will result in a higher surviving spouse benefit, enabling a widow or widower to receive the full amount of their spouse’s monthly benefit plus their own benefits, if the surviving spouse has their own earnings.
Ex-spouses who were married for at least ten years and did not remarry until they reached age 60 are eligible for survivor benefits. You may not want to wait until FRA or age 70 on their behalf, but circumstances vary, so you should at least be aware of this.
The survivor benefit for young children or disabled children of any age, if they were disabled before age 22, does not change regardless of when you claim.
The complexity of all of these programs makes it sometimes difficult to know what the best claiming strategy is. Most people focus on the individual or couple, but not the entire family’s benefits.
Social Security experts advise wage earners to speak with more than one employee to get answers, since you may get different answers. Do your research and be your own advocate to ensure that you and your family receive the correct benefits.
Reference: CNBC (Feb. 7, 2022) “Social Security may be a ‘treasure trove’ for you and your family. But first you have to navigate some complex rules”