The social security dilemma: when to start looking for ways to increase lifetime benefits?

Social Security offers one of the best forms of retirement income: a tax-favored source of income that lasts a beneficiary’s lifetime with inflation protection and survivor benefits.

For most people, benefits provide 30% to 35% of pre-retirement income. In an uncertain world with fewer pension coverage, reduced 401 (k) balances, and possibly less earned income due to forced early retirement and layoffs, the option to collect Social Security as soon as possible is attractive.

People often ask when is the optimal time to start receiving benefits. Many apply for benefits as soon as they are eligible at age 62. The average age when people start getting paid is just over 63 1/2.

Social Security benefits are based on lifetime earnings. Real wages are adjusted to take inflation into account. And then the average monthly income during the highest income quarters over the previous 35 years is used to determine a basic benefit or “primary insurance amount” called the PIA.

The PIA determines how much you receive at full retirement age: 65 or older, depending on the person’s date of birth. If you choose to collect benefits before full retirement age, the monthly benefit is reduced by approximately 6.7% per year. For someone with a full retirement age of 66 who retires at 62, you can expect to receive only 75% of the total benefit. On the other hand, someone who is slow to receive a higher benefit credit. So waiting until age 70 can result in monthly payments that are 32% higher or 8% per year for the four-year delay in this example.

Several factors will influence this personal decision. In general, the longer the collection can be delayed, the greater the monthly benefit one can receive. Since women tend to outlive men, women can benefit more from higher payments later on. So if a single woman can afford to meet her lifestyle needs from other sources, delay is a reasonable option. For single men or women, family longevity and personal medical history can be the deciding factors.

For those who are married, benefits are based on each spouse’s income record. For spouses who do not have their own income record, the benefit is based on 50% of that of the working spouse. The surviving spouse’s benefits are equal to the monthly benefit of the higher-income deceased spouse. If it is delayed, the spouse will be eligible for a potentially higher benefit.

Two little-known strategies can increase the benefits for your recipients.

Claim and suspend:

This option resulted from the Seniors’ Freedom to Work Act of 2000 and provides the recipient with an option to change their mind. This is ideal for those who are eligible to start collecting, but have determined that the full benefit is not required now.

This strategy offers three ways to increase personal outcomes for a worker who has reached full retirement age (FRA): o Enroll in Social Security and allow your spouse to claim spousal benefit now. o Suspend the receipt of benefits by the worker who can now continue working and increase deferred retirement credits. By delaying receipt by the worker, the amount that this worker will be eligible to collect each month continues to grow 8% per year until age 70. OR If a beneficiary using this strategy dies, the highest increased benefit goes to the surviving spouse.

Claim now, claim more later:

This option works best for married couples who have their own employment history and have reached the corresponding full retirement age for each beneficiary.

In this option, a worker can claim a benefit based on 50% of a spouse’s PIA while continuing to work and an increase in deferred retirement benefits to 8% per year on the worker’s own record, ideally up to age 70. Later, the spouse can switch from a spousal benefit to claim a benefit on his or her own work history, presumably if it is larger.


Deciding to delay benefits really pays off when a beneficiary lives long enough to maximize the benefit, either equal to or longer than the actuarial age. For those who are 65 years old, life expectancy is about 19 years longer on average or up to 84 years, slightly longer for women and slightly less for men.

For women who survive to old age, a higher income spouse who does not receive benefits can mean the difference between poverty and not for the surviving spouse.

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