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Rules Of Thumb For Social Security Benefit Planning

As changes are inevitable within the Social Security system – many benefits remain constant

One constant in Social Security benefit planning is everyone’s situation is different. Most couples’ lifetime income stream from Social Security retirement benefits is approximately $1,500,000.

This is why when planning your claiming strategy, you need to consider your joint life expectancies. This is a one-time decision you need to get right. Just because you can claim, does not mean you should. There have been many articles written as to the best age to claim benefits. From my experience, there are as many good reasons as bad reasons to claim early, and as many good reasons to claim later as bad reasons to claim later.

Over the years, listed below are principles, or rules of thumb based on my experience and practice that you need to be aware of when devising your Social Security claiming strategy.

  • Anytime you take a benefit before full retirement age, it is always reduced
  • If you work before attaining your full retirement age for wages or are self-employed, and you are collecting Social Security benefits, you will be subject to the annual earnings limitation if you exceed $21,240 in 2023. At full retirement age, this restriction goes away
  • Spousal benefits are replaced with survivor benefits when your spouse passes away
  • Delayed retirement credits are only earned on your own benefit and are not applicable when calculating the spousal benefit
  • At full retirement age, the maximum retroactive benefit you can receive is 6 months
  • Anytime you file for benefits you are “deemed” to be filing for any and all benefits available to you – usually applies to spousal benefits
  • If you are born after January 2, 1954, you cannot use the “restricted application”
  • You can voluntarily suspend your own benefits at or after your full retirement age
  • The earliest you can apply for retirement benefits is 62
  • You are always paid your own benefit first if other benefits are available to you
  • There is no good reason to wait past 70 to collect benefits
  • To receive a spousal benefit, it must be greater than your own retirement benefit
  • Both spouses cannot receive spousal benefits at the same time
  • There is no advantage to be gained by filing for spousal benefits after your full retirement age
  • If you have another government pension (non-covered), the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) will apply
  • The maximum WEP reduction for 2023 is $558
  • To receive ex-spousal benefits, you must have been married at least 10 years
  • If you remarry, you cannot collect spousal benefits from an ex-spouse
  • Divorced spousal benefits do not affect the benefits of a current spouse
  • Children’s benefits are available to children under 18, 19 if still in high school or disabled before 22
  • You may want to consider filing early if children’s benefits are available
  • A spouse who is not yet 62 can receive a child in care benefit if they are caring for a child under 16
  • You can apply for survivor benefits at 60 or 50 if disabled
  • If you remarry after age 60, you can still collect survivor benefits, but if you remarry before 60 you cannot collect survivor benefits
  • Anytime a survivor benefit is involved, you should consider taking your own benefit or the survivor benefit as soon as possible
  • There is no advantage to waiting to start collecting survivor benefits after your full retirement age
  • Social Security benefits may be taxable

I hope these important highlights will help clarify your decision-making process. Remember, take the wrong benefit at the wrong time, it is always smaller and forever. You need to get your claiming strategy right the first time.

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