Figuring out the best time to apply for benefits — and which benefits you’re eligible for — involves headache-inducing calculations and navigating more than 2,700 rules governing the program’s payouts.
Make the wrong decision and you could leave tens of thousands of dollars on the table, if not more, according to economist Laurence Kotlikoff and financial journalists Philip Moeller and Paul Solman, who coauthored the book “Get What’s Yours: The Secrets to Maxing Out Your Social Security.”
“You can be a very smart, sophisticated person yet be completely oblivious to what’s due you,” they note.
Sadly, there is no one-size-fits-all rule. But the book offers different strategies to maximize your benefits depending on your marital status, age, earnings, and financial needs, among other considerations.
Here are some of the key takeaways:
1. It pays to wait. You may start collecting Social Security retirement benefits as early as age 62. But the longer you wait, the more you — and your spouse or ex – will be paid.
Wait until you’re 70 and your payment will increase by 76%.
That’s because you earn so-called delayed retirement credits, which are equal to 8% a year plus inflation for every year you delay claiming benefits past full retirement age. That’s age 66 for people born between 1943 and 1954, and 67 for everyone born after 1960.
There is, however, no advantage to waiting past 70 because, at that point, the delayed retirement credits stop accruing.
2. Know whether you’re eligible for more than just your own retirement benefit. If you’re married, divorced or widowed you may also be able to claim a “spousal” or “survivor” benefit based on the work records of your spouses and exes, whether they are alive or dead.
That assumes three things, however: you were married for a certain period of time (minimums vary), you don’t remarry too soon and you’re strategic about when you apply.
If you’re married, one of you may claim a full spousal benefit, which is equal to one half of your partner’s retirement benefit.
If you’re divorced, you and your ex each may claim a spousal benefit based on the other’s retirement benefit, assuming you were married for at least 10 years.
If you’re widowed, your survivor’s benefit can be as much as 100% of your deceased spouse’s full retirement benefit. But, in some instances, your survivor benefit will be reduced, depending when you take it.