Deconstructing Social Security misconceptions

Review these key considerations when it comes to claiming Social Security benefits.

06 Nov 2019

Key takeaways

  • When’s the best time to claim your Social Security benefits?
  • What do you need to know about marital status and benefits when it comes to Social Security?
  • What should you keep in mind if you're divorced, widowed or single?

For many, Social Security can feel like a one-size-fits-all benefit: You hit retirement age, claim it and then move on to enjoy the rest of your big plans.

In reality, there are a handful of considerations you need to consider before you claim your Social Security benefits. Many of these depend on your situation—your age, your marital status and your long-term retirement saving plans, among others.

While every situation is different, Carlo Cordasco, National Field Director with the Nationwide Retirement Institute, shares some common scenarios worth considering in advance.

Claiming your benefits

When it comes to maximizing Social Security, Cordasco notes there’s one big decision you want to make in advance: when to claim your benefits.
The Social Security Administration (SSA) calculates your benefits using the average of your highest 35 years of earnings. This number determines your Primary Insurance Amount (PIA), the full benefit you get by waiting for your Full Retirement Age (FRA).

Cordasco explains that, though you’re eligible for benefits at 62, you won’t receive 100% of those benefits unless you wait to file until you hit your FRA, typically around the ages of 66 or 67. If you file after your FRA, you will receive more than 100% of your benefits thanks to a credit that gets added each year from your FRA to age 70.

For instance, if your FRA is 67 and you claim your benefits at 62, you'll receive 70% of your PIA (the monthly benefit you would have received if claimed at FRA). However, if you wait until 70 to claim, you'll receive 124% of your PIA.
“It’s critical to think about Social Security as part of your overall financial plan,” Cordasco says. “I think some people don’t understand how much the reduction is and the impact that can last over a lifetime.”

Understanding marital status and benefits

When it comes to determining the right time to claim your Social Security benefits, Cordasco notes your marital status is something else important to consider.

Married couples

Spouses can approach their Social Security strategy jointly because the SSA provides for spousal benefits—and that includes divorcees as well as widowers/widows.

Cordasco highlights the primary rules around spousal claims, which include:

  1. You have to be married for at least one year.
  2. You have to be at least 62 years old (but remember, if you claim your full benefit before your FRA, that benefit will be reduced).
  3. Your spouse has to have claimed his or her own benefit as well, which means you’re entitled to up to half of his or her PIA.
  4. Also keep in mind that spousal benefits do not include the delayed benefits.

Your advisor can help you figure out the best time for you to claim individually or together to maximize your total benefits and hedge against risk. However, for many spouses, it follows that if spouses both wait to claim benefits past age 62, their monthly benefit will be larger.

“The best thing to do is to analyze both decisions in light of what the actual lifetime benefits under each scenario would look like,” Cordasco explains. “Then use that information to help with the decision.”

Single people

If you’re single and not married, widowed or divorced, your options are more straightforward. Cordasco notes you can choose to claim your benefits at the time that makes the most sense for your long-term retirement plans.

Divorcees and widows

“Understanding the impact of divorce, with regards to financial planning and Social Security, is an important conversation to have,” Cordasco says.

If you’re divorced, you may be eligible to claim spousal benefits on your ex-spouse's earnings record if you are at least 62 years old, previously married to them for at least 10 years, and you're unmarried. If you’ve been divorced for at least two years and your ex-spouse has not filed, as long as you meet the 62 years old and 10-year marriage requirements, you can file for your divorced spousal benefits independently of your ex-spouse filing. In this scenario, according to Cordasco, you don’t need to wait for your former spouse to claim his or her benefits first. Keep in mind, if you do remarry, those spousal benefits end. Also note, your former spouse won’t see an impact on his or her benefits when you claim a divorced spousal benefit.

If you are widowed, you can claim Social Security survivor benefits. In this case, as long as you are 60 years old and you were married for at least nine months, you can claim benefits based on your deceased spouse’s benefits.

Again, here’s where planning is important: If your spouse delayed his or her Social Security claim and was past the FRA age, then you will get a more substantial benefit for the rest of your life. And, if you remarry after 60, then you get to keep that survivor’s benefit, but that’s it—you can’t stack multiple benefits.

Speaking with your advisor

These complexities highlight why it’s so important to engage with your advisor to better understand the best time to claim your benefits.

“Slow down,” Cordasco urges. “Don’t do what other people have done just because they’ve done it. Talk to your advisor and really understand that Social Security is just one part of a comprehensive financial plan.”

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