For many approaching retirement, the decision regarding when to file for Social Security benefits presents a complex challenge. This choice is influenced not only by the amount of lifetime earnings but also by the age at which a claim is made.
Individuals born in 1960 or later reach full retirement age at 67, at which point they qualify to receive the full amount of their Social Security benefit without any reduction. It is possible to claim these benefits as early as age 62, but doing so results in decreased monthly payments. Conversely, delaying claims beyond full retirement age, up to 70, incrementally increases monthly benefit amounts.
Some retirees in poor health may opt to collect Social Security earlier. The rationale is that, given potential limitations on lifespan, receiving benefits sooner—even at a reduced rate—might increase total lifetime payments. However, this approach introduces additional considerations, particularly regarding the financial impact on a surviving spouse.
While single beneficiaries need only consider their own benefit timeline, married couples must also account for how their decisions affect spouse benefits, especially if one spouse is likely to outlive the other. In households where one partner earned more during their working years, careful planning is critical.
Upon the death of a Social Security beneficiary, the surviving spouse is entitled to a monthly benefit equivalent to 100% of the deceased partner's benefit amount at the time of death. Accordingly, an early claim that reduces the deceased's monthly payout would also reduce the survivor's income, potentially impacting their financial security.
Although this impact may be minimal if the surviving spouse was the higher earner or eligible for a larger Social Security benefit, the survivor benefit will always default to the higher of the two individual benefits. For example, if one spouse’s maximum monthly benefit is $2,500 (achieved by waiting until age 70 to claim) while the other’s full retirement age benefit is $3,000, the survivor would continue to receive $3,000, mitigating the effect of early claims by the deceased spouse.
It is therefore essential to analyze whether a spouse can manage financially with a reduced survivor benefit if the other spouse files early. This evaluation is particularly important for couples where the diminished benefit could significantly affect the surviving spouse's standard of living.
Given these complexities, discussions between spouses about Social Security claiming strategies are important for aligning their financial plans. Carefully weighing the trade-offs of early versus delayed claims can facilitate decisions that best support the couple’s mutual well-being.
In this context, thorough financial modeling and joint consideration are advisable steps prior to filing, particularly for those facing health challenges that prompt consideration of early Social Security claims.