2 Situations Where a Delayed Social Security Claim Will Cost You Money | Smart Change: Personal Finance
You can claim Social Security benefits at any time between the ages of 62 and 70. The age of the claim affects how much money you get each month. And since the size of your check changes based on when you get your first payment, your choice of when to start benefits can affect your lifetime income.
It can be hard to decide whether it’s better for you to claim Social Security ASAP – which means you get more checks than those who delay, but what makes you get less payments – or if you have to delay to earn larger monthly payments, Although this means getting fewer checks over the course of your life.
But while this choice can be complicated, there are two cases where a late claim will certainly not pay off.
1. If you are claiming spousal benefits after full retirement age
If your spouse earns a higher income than you or if you don’t earn enough on your own to get Social Security retirement benefits, you may decide that claiming spousal benefits is the way to go. These give you Social Security income of up to 50% of the standard benefit for the main person.
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If you plan to receive spousal benefits, you can increase the amount you receive by waiting until your full retirement age (FRA) to claim them. FRA ages are between 66 and 4 months and 67 years. A claim made earlier reduces benefits because your examinations start earlier than the due date.
But while Social Security retirement benefits continue to increase after FRA until age 70, spouse benefits do not. You can’t increase your benefits if you wait past your full retirement age, so there is absolutely no reason to do so. By delaying, you will lose income and not get bigger checks later for doing so.
2. If she dies before the tie
Waiting after age 62 to get Social Security increases your monthly benefits. But because you’re delaying your claim for benefits, you’re foregoing all income that could have come from the checks you chose not to receive.
The reason people do this is because they end up gambling with more money later once they finally start getting the benefits. Social Security checks increase for each month you delay after age 62, so retirees who defer their benefits hope to get as many higher checks so that they cover the lost money and then go on to get extra money on top of that.
Unfortunately, this requires you to live long enough to enter a sufficient number of large payments. If you died early, you gave up a lot of income that you could have had without anything to show for it. This can leave you with much less money. If you delay your claim until age 70, you will forfeit all income that you have been eligible for for the past eight years. If you died at age 71, you wouldn’t come close to compensating the hundreds of thousands of dollars you’ve received over the years if you hadn’t deferred your claim for benefits.
As these two examples show, a late Social Security claim isn’t always the best option and can sometimes come at a cost. Be sure to think about it before deciding the best age to apply for benefits.
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