by Leonora Bowman
Like all financial questions, the answer to this question is, “it depends.”
You can start drawing social security benefits based on your own work history as early as 62 and as late as 70. Currently, those of us, who are baby boomers, born between 1943 and 1954, 66 is our full retirement age. The full retirement age increases 2 months each year until it reached 67.
There are several factors, which will help to determine when you should start drawing social security, the most important being if you and your family can financially afford to delay drawing social security until a later date. For each month, after you reach your full retirement age, you will earn 2/3 of 1% delayed retirement credits, or 8% per year. You can only earn delayed retirement credits based on your work history. By suspending receipt of your social security between 66 and 70, your monthly benefit will increase by 32%. Obviously, if you can afford to do so, this is your best option. Spouses and widows do not earn delayed retirement credits.
If you are married and the family can financially afford to do so, there are some choices you can make to optimize your family’s social security monthly benefit.
The first choice that can be made, once full retirement age is reached, is for the higher earning partner to file and suspend collection of his/her benefit. This will allow two things to happen. 1) the spouse filing and suspending collection will begin to earn delayed retirement credits and 2) the lower earning spouse can begin drawing a spouse benefit, which may be higher than the amount he/she may have received based on his/her own work history.
File and restrict your benefit is another option that married couples can do if they are both over 62 and one is already drawing benefits. The partner not already receiving benefits can file and restrict the benefit he/she receives to 50% of the spousal benefit to which he/she is entitled and allow his/her own benefit to continue to earn delayed retirement credits until he/she reach 70. The partner choosing to file and restrict must have reached his or her full retirement age to choose this option.
Those who are divorced and were married to their former spouse for at least 10 years, are at least 62 and have not remarried, can elect to receive the divorced spouse benefit provided it is greater than the amount he/she would have received based on their own work history.
The Social Security Administration is a great resource if you have specific questions. To determine which social security benefit path is best for you and your family, please contact Langdon & Company LLP or your financial advisor.
Leonora “Lee” Bowman ([email protected]) is a Manager in our Accounting Services practice. She has over 25 years of experience in taxation and also specializes in multi-dimensional corporate accounting across various states.