Early claim to social security? Here’s Who Might Regret It More Than You | Personal Finance

(Dan Caplinger)

Tens of millions of people rely on Social Security for financial assistance in retirement. After a long career, it’s comforting to know that you can get money from Social Security as early as age 62.

Many people base their decisions when they claim Social Security on their own personal needs. In particular, if you are in poor health, it often makes sense from a strictly individual standpoint to call Social Security as soon as possible so that you will get at least some of the benefits of the program. However, if you are married and your partner does not have a work history that matches yours, claiming early can have the unintended consequence of leaving a source of regret and financial hardship for your partner after your death.

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Why do so many people turn to Social Security early?

Social Security is known to offer different payouts depending on when you apply for benefits. At full retirement age — which is 67 for those born in 1960 or later — you can expect your basic benefit.

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You can claim from the age of 62, but you will receive 30% less than your full pension amount. You can also wait until you turn 70 and get a 24% increase on your monthly payments. This makes the benefit at age 70 77% higher than the benefit at age 62.

If you think you’ll live a long life, it might make a lot of sense to give up eight years of benefit to make each monthly payment bigger. But if you’re in doubt about turning 70, claiming early seems like the smarter move.

Why your partner might regret your mistake

The problem, however, is that your own retirement benefits aren’t necessarily all you need to think about. Your spouse is entitled to claim a survivor’s benefit after your death and the amount of the survivor’s benefit is based on a number of factors. One is when you husband decides to apply for these survivor benefits. As with your own pension, a spouse who applies for survivor benefits earlier will receive less per month than someone who waits until full retirement age.

But another factor in determining survivor benefits is the amount that you received before your death. If you had applied for Social Security at age 62, your reduced benefit would be the starting point from which your spouse’s survivor benefits would be calculated. Conversely, if you waited until age 70, that increased benefit would become the baseline. The result is also a potential 77% swing in survivor benefits.

How this can turn out?

It is easier to see by example the impact an early decision can have on a spouse. Suppose you are married and 62 and would be entitled to a typical retirement benefit of $1,500 per month at full retirement age of 67. However, due to a medical condition, you do not expect to live to 67. Your spouse is also 62 and in good health.

Your first instinct might be to claim Social Security right away. In this way you will receive no less than five years of social security. The benefit would be reduced to $1,050 per month, but that’s still a whopping $63,000 that you wouldn’t have gotten otherwise.

However, doing so will also lock your spouse’s maximum survivor benefit at $1,050 per month. It may even be fewer if the time of your death resulted in your spouse claiming benefits earlier than the spouse’s full retirement age.

In contrast, if you waited to claim — or never even got around to it — your spouse would be entitled to a survivor’s benefit based on the full $1,500. There would still be a reduction if the survivor filed a claim before full retirement age, but it would be based on that much larger $1,500 figure.

In the end, your spouse would probably end up getting $450 a month less until death. If you died at age 67 and your spouse lived to age 90, the amount lost over that 23-year period would be $124,200 in today’s dollars — nearly twice as much as you would have received by claiming early. .

A difficult decision

Choosing when to take Social Security is difficult because you cannot predict the future. Before withdrawing the money early, however, think about the potential impact on your spouse. It can change your mind about what is the best choice for your family.

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