Because of the complex rules associated with the Social Security program, many retirees don’t realize they’re entitled to receive some benefits.
At age 70, Social Security benefits are 76% higher than at age 62, according to the Social Security Administration, so waiting to collect can result in a significantly higher benefit amount.
Retirees are eligible for payment based on their living or deceased spouse(s) and/or ex-spouse(s) work history. But timing is critical and you must know when to claim these benefits.
It seems like a simple equation. You pay money into Social Security during your working years. You get it back when you retire. And if you hold off past full retirement age, you get more. Unfortunately, it’s not that simple.
The reality is there are 2,728 core rules to the Social Security program.* Given that jaw-dropping number, it’s not surprising that
many retirees are leaving substantial amounts of money on the table.
The problem is that we’re not armed with basic information about our options, according to Rob Kron, Head of Investment and Retirement Education for BlackRock. “None of us are given a user guide when we start paying into the system,” he says. “The Social Security statement can be confusing and there are areas that are not covered, so a lot of people don’t know they can apply for certain benefits.”
The result? Valuable benefits, such as those for spouses and survivors, can be underutilized.
How to maximize Social Security
1. Be patient.
There may be instances where you need to dip into Social Security early — if you lose your job or your health takes a turn for the worse. But in the long run, most people are better off waiting until full retirement age to start receiving benefits.
For example, if your full retirement age is 67 and you start receiving benefits at age 62, you would receive 70% of the monthly benefit because you will be getting benefits for an additional 60 months. At age 65, you would receive around 86% of the monthly benefit. If you start receiving spouse's benefits at age 62, your monthly benefit amount is reduced to about 32.5 percent of the amount your spouse would receive if his or her benefits started at full retirement age.1
View more information on benefit reduction amounts based on retirement age on the Social Security website.
2. Get all of what’s yours.
Take all the benefits available to you based on the work history of your current spouse, your ex-spouse(s), your deceased spouse(s) and/or your deceased ex-spouse(s).
3. Get the timing right.
You may be eligible for a spouse or survivor benefit as well as your own retirement benefit. But Social Security won’t give you both at once. So you need to time them. There can be either:
- retirement and spousal benefits, including divorce spousal benefits, or
- retirement and survivor benefits, including survivor benefits for those who are divorced
Retirement benefits are based on your own earnings record. Spousal and survivor benefits are based on your spouse’s earnings, whether the spouse is deceased or divorced from you.
Work with an advisor to help get the Social Security benefit amount you deserve
Your financial advisor can walk you through your distribution options, point out benefits you might be missing out on and help you incorporate Social Security into your overall financial picture. “With the right guidance, it really doesn’t have to be an overwhelming process — and everyone deserves to get all they’re entitled to receive,” Kron says.