When Should I Claim Social Security Benefits?
In addition to the pension and Thrift Savings Plan (TSP), Social Security benefits represent another major retirement benefit for federal employees. Workers often ask when they should claim benefits, but there is not a single answer for everyone. Workers can claim social security at any time between ages 62 and 70. However, claiming benefits before your full retirement age (FRA) will permanently reduce your benefit and claiming benefits after your FRA may permanently increase your benefit. Several factors will impact the age at which you decide to claim including retirement savings, retirement date/income, marital status, life expectancy, and market performance. Let’s explore these different factors below:
1. Retirement savings: Workers with significant retirement savings or other retirement income compared to their spending may have more flexibility when it comes to claiming social security benefits. If they want to delay in order to increase their benefit, they have plenty of savings and other income to cover expenses while they delay.
2. Retirement date/Income: If a worker retires closer to their FRA, they may benefit from delaying their benefit until FRA or even later, but if they retire early, it may make sense for them to claim their benefits earlier. However, if a worker claims social security benefits prior to their full retirement age but they continue to have significant earned income, they may see a portion of their benefit withheld until the earnings decrease. It may have been better for the employee to delay until their earned income decreased.
3. Marital status: A spouse may be able to receive benefits from a worker’s social security benefit. While living, a spouse may be able to receive up to 50% of the worker’s benefit. If the worker predeceases, the spouse can step up to receive the worker’s higher benefit. Decisions the worker makes on their own benefit also impact their spouse, so it is important for workers to consider the long-term planning impact of their claiming decision.
4. Life expectancy: A worker with a longer life expectancy may want to delay claiming benefits in order to receive a higher amount over a longer period of time. A worker with a shorter life expectancy may want to start collecting their benefits earlier in order to receive more total benefit earlier.
5. Market performance: If markets show strong performance and investments are up in value, workers may choose to delay benefits since there are additional portfolio gains. If investments are down in value, workers may consider claiming benefits to not have to withdraw as much from the portfolio.
There is no one-size-fits-all approach to social security, and it is important to consider several factors as you prepare to make your claiming decision. The advisors at SCO Wealth Management understand the unique rules pertaining to Social Security and can integrate your claiming decision into the rest of your retirement plans. Please use us as a resource for your questions or schedule a complimentary review of your retirement plans.
1. Retirement savings: Workers with significant retirement savings or other retirement income compared to their spending may have more flexibility when it comes to claiming social security benefits. If they want to delay in order to increase their benefit, they have plenty of savings and other income to cover expenses while they delay.
2. Retirement date/Income: If a worker retires closer to their FRA, they may benefit from delaying their benefit until FRA or even later, but if they retire early, it may make sense for them to claim their benefits earlier. However, if a worker claims social security benefits prior to their full retirement age but they continue to have significant earned income, they may see a portion of their benefit withheld until the earnings decrease. It may have been better for the employee to delay until their earned income decreased.
3. Marital status: A spouse may be able to receive benefits from a worker’s social security benefit. While living, a spouse may be able to receive up to 50% of the worker’s benefit. If the worker predeceases, the spouse can step up to receive the worker’s higher benefit. Decisions the worker makes on their own benefit also impact their spouse, so it is important for workers to consider the long-term planning impact of their claiming decision.
4. Life expectancy: A worker with a longer life expectancy may want to delay claiming benefits in order to receive a higher amount over a longer period of time. A worker with a shorter life expectancy may want to start collecting their benefits earlier in order to receive more total benefit earlier.
5. Market performance: If markets show strong performance and investments are up in value, workers may choose to delay benefits since there are additional portfolio gains. If investments are down in value, workers may consider claiming benefits to not have to withdraw as much from the portfolio.
There is no one-size-fits-all approach to social security, and it is important to consider several factors as you prepare to make your claiming decision. The advisors at SCO Wealth Management understand the unique rules pertaining to Social Security and can integrate your claiming decision into the rest of your retirement plans. Please use us as a resource for your questions or schedule a complimentary review of your retirement plans.