Dear Rusty: I have a question regarding my SS benefits. I turned 68 this month and work part time. I earned $28,000 last year but will probably gross $36,000 to $38,000 this year. My husband collects his SS, and he earned $25,000 last year. I was told by a financial planner that I should apply for my benefits now, instead of waiting until I’m 70. I would collect $1,700/month at 68 and $1,944/month if I wait. Which is the smarter move? Signed: Seeking Answers
Dear Seeking: I’m sure your financial advisor would agree that your decision on when to claim your Social Security comes down to just a few basic things – 1) how badly you need the money, 2) your life expectancy, and 3) whether you will receive a spousal boost from your husband when you claim.
Because you have already passed your full retirement age (FRA) of 66 years and 4 months, your work earnings won’t negatively affect your monthly SS benefit amount. If you claim now, however, your work earnings will affect how much of your SS benefits will be subject to income tax. Assuming you file your income tax as “married/filing jointly,” up to 85% of the Social Security benefits you receive during the tax year will become part of your income taxable by the IRS. If you do not urgently need the extra money that your SS will provide, then waiting longer to claim will also postpone paying income tax on your received benefits, and that may be a consideration.
Your life expectancy is key in making your decision on when to claim. You already know that your benefit will be $244 per month more if you wait until you are 70 to claim. If you claim at 68 (e.g., this month), you will collect about $40,800 by the time you reach 70. If you, instead, wait until age 70 to get that extra $244/month benefit, it will take you about 14 years collecting at the higher rate to offset the $40,800 you would have received had you claimed now (in other words, you would break even moneywise at about age 84). If your life expectancy is longer, then waiting to claim may be the better choice. Of course, no one knows how long they will live but, for general guidance, average life expectancy for a woman your current age is about 87. Family history and your current health are obviously influencing factors as well. If you wish to get a more personal estimate of your life expectancy, I suggest using this tool: www.socialsecurityreport.org/tools/life-expectancy-calculator/.
In the end, if you believe you will attain at least average life expectancy and you don’t urgently need the money now, waiting longer will not only give you a higher monthly benefit in your later years, but also the most in cumulative lifetime benefits. If, however, you have reason to suspect you won’t achieve at least average life expectancy, or you need the SS money sooner, claiming before age 70 is likely the better move.
One other thing to consider: If your benefit as your husband’s spouse will be more than your own earned maximum SS retirement benefit, then you should claim your SS benefit now. Your maximum benefit as a spouse would be 50% of your husband’s full retirement age entitlement and, if that is more than your own benefit will be at age 70, then claiming now to get your maximum spousal benefit would be your best choice. To get a spousal benefit from your husband, your personal FRA entitlement (not your age 68 amount) would need to be less than half of his FRA entitlement. If that isn’t the case, then you should make your decision based only on your own Social Security entitlement, as described above.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisoryor email ssadvisor@amacfoundation.org.
