Claim Social Security early? Here’s who might regret you more than you | personal financing
Tens of millions of people rely on Social Security for financial support in retirement. After a long career, it’s comforting to know that you can get money from Social Security as early as 62.
Many people base their decisions on when to claim Social Security based on their personal needs. In particular, if you’re in poor health, it often makes sense from a purely individual standpoint to claim Social Security as soon as possible so you get at least some benefit from the program. However, if you are married and your spouse does not have a work history that matches yours, claiming early may have the unintended consequences of letting go of your partner’s source of regret and financial challenges after your death.
Why are so many people claiming Social Security early
Social Security is known to offer different payments depending on when benefits are claimed. At full retirement age — which is 67 for those born in 1960 or later — you can expect to receive your basic benefits.
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You can claim in 62 years, but you will get 30% less than your full retirement amount. You can also wait until you’re 70 and get 24% back your monthly payments. This makes the interest at age 70 77% higher than the interest at age 62.
If you think you’re going to live that long, giving up eight years of benefits in order to make each monthly payment bigger can make a lot of sense. But if you suspect you’ll reach the age of 70, claiming early seems a smarter move.
Why would your wife regret your mistake?
But the problem is that your retirement benefits aren’t necessarily the only thing you should consider. Your spouse has the right to claim heirs’ benefit after your death, and the amount of heirs’ benefit is based on a number of factors. one when you have one Husband He decides to claim these heirs’ benefits. Just as with your retirement benefits, a spouse who claims inheritance benefits earlier will receive less per month than someone who waits until full retirement age.
But there is another factor in determining the entitlements of the heirs, which is the amount You are They were receiving before your death. If you have claimed Social Security at age 62, your reduced benefits will be the starting point from which your spouse benefits will be calculated. Conversely, if you wait until the age of 70, this additional feature will become the basis. The result is a 77% potential swing in survivor benefits as well.
How could this happen
The effect of an early decision on a pair is easier to see through an example. Let’s say you’re married, age 62, and entitled to typical retirement benefits of $1,500 per month at your full retirement age of 67. However, due to a medical condition, do not expect to live to the age of 67. 62 and in good health.
Your first instinct may be to claim Social Security right away. This way, you’ll get the equivalent of five years of Social Security. The bonus will be reduced to $1,050 a month, but that’s still $63,000 you wouldn’t otherwise have.
However, doing so will lock in the maximum inheritance benefit for the spouse at $1,050 per month as well. Maybe less If the timing of your death results in your spouse claiming benefits before the spouse’s full retirement age.
By contrast, if you wait for the claim – or even can’t get it at all – your spouse will have the right to heirs’ benefit based on the full $1,500. There is still a reduction if a survivor claims before full retirement age, but it will be based on that much larger figure of $1,500.
In the end, your spouse is likely to get $450 less per month until death. If you died at age 67 and your spouse lived to 90, the amount lost over the 23-year period would be $124,200 in today’s dollars — almost double the amount you would have earned by claiming early.
Choosing when to get Social Security is tricky because you can’t predict the future. Before you take the money early, be sure to think about the potential impact on your spouse. It may change your mind about the best option for your family.
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