18:19
Social Security 62 vs 70: Everyone Is WRONG About the Math
Dr. Ed Weir, PhD, Former Social Security Manager
Overview
This video explains the complex decision-making process behind when to start receiving Social Security benefits, challenging the common assumption that delaying is always best. It details various benefit types, eligibility ages, and the impact of claiming early versus late. Key factors influencing the optimal claiming age include personal health, family longevity, the need for income, potential taxation, and the impact on auxiliary beneficiaries like spouses and children. The video also covers options for correcting mistakes made when filing and the potential future cuts to Social Security benefits.
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Chapters
- The earliest age to claim retirement or divorced spouse benefits is 62.
- Surviving spouse benefits can be claimed as early as age 60.
- Disabled widow's benefits can be claimed as early as age 50.
- Full retirement age is 67 for those born after 1960.
- Medicare eligibility typically begins at age 65, or 24 months after starting disability benefits.
Knowing the earliest possible ages for different benefit types helps individuals understand their immediate options and avoid missing out on benefits they are entitled to.
A person can claim surviving spouse benefits at age 60, two years earlier than standard retirement benefits at age 62.
- Delaying benefits past full retirement age earns delayed retirement credits, increasing the monthly benefit amount.
- Each year of delay after full retirement age adds an 8% increase to the benefit.
- Waiting until age 70 maximizes the monthly benefit and can provide a higher survivor benefit for a spouse.
- The decision to delay should consider personal longevity and family health history.
Understanding delayed retirement credits highlights how strategic waiting can significantly increase lifetime Social Security income, especially for those with longer life expectancies.
If your full retirement age benefit is $1,000, waiting until age 70 (3 years past full retirement age) increases your benefit to $1,240 due to 8% annual credits (3 years * 8% = 24% increase).
- The optimal claiming age is highly personal and cannot be known with certainty until after one's lifetime.
- Immediate financial need is a primary driver for claiming benefits early.
- Poor health or a family history of short lifespans may favor claiming benefits sooner rather than later.
- The presence of auxiliary beneficiaries (children under 18, disabled children under 22, or a spouse) can strongly influence the decision to claim early to provide them with benefits.
- Potential taxation of benefits and the risk of future benefit cuts due to Social Security's financial shortfall are also considerations.
This section emphasizes that a personalized approach, considering individual circumstances like health, family, and financial needs, is crucial for making the best claiming decision.
A person with young children under 18 might choose to claim benefits at 62, even if healthy, to provide them with up to 50% of their benefit amount, rather than waiting until age 70 and forfeiting years of potential support for the children.
- It is permissible to work while receiving Social Security benefits, but earnings limits apply before full retirement age.
- If earnings exceed the annual limit ($24,480 in the video's example), benefits are reduced by $1 for every $2 earned over the limit.
- Benefit withholding due to excess earnings is not a permanent loss; benefits are recalculated at full retirement age based on the number of months benefits were actually received.
- Voluntarily receiving overpayments (e.g., by not reporting earnings accurately) is generally not penalized if handled correctly with Social Security.
Understanding the rules around working while collecting benefits prevents unexpected benefit reductions and clarifies how excess earnings impact your payments.
If you earn $10,000 over the annual limit before your full retirement age, Social Security will withhold $5,000 in benefits, which is equivalent to about three monthly payments if your benefit is $2,000.
- It's possible to withdraw your Social Security application within 12 months of filing, but you must repay all benefits received.
- After withdrawing, you can reapply, and there is no mandatory 60-day waiting period to reapply.
- Protective filing occurs when you contact Social Security to express your intent to file, which can establish a benefit start date even before a formal appointment.
- This protective filing is crucial for ensuring benefits are retroactive to the date of your initial inquiry, especially for complex cases like divorced spouse benefits.
Knowing how to correct mistakes or establish protective filing safeguards your right to benefits and ensures you receive the full amount you are entitled to from the earliest possible date.
If you call Social Security to inquire about filing for divorced spouse benefits two months before your appointment, that call can establish a protective filing date, potentially making your benefits retroactive to that earlier inquiry date.
Key takeaways
- The decision of when to claim Social Security benefits is highly individualized and depends on personal circumstances, not a one-size-fits-all rule.
- Delaying benefits past your full retirement age increases your monthly payout significantly due to delayed retirement credits.
- Consider your health, life expectancy, and family longevity when deciding whether to claim early or delay.
- The financial needs of dependents, such as young children or a spouse, can be a compelling reason to claim benefits earlier.
- Working while collecting benefits before full retirement age can lead to benefit withholding if earnings exceed certain limits.
- It is possible to correct a premature filing by withdrawing your application within 12 months, provided you repay all benefits received.
- Future Social Security benefit cuts are a possibility if Congress does not act, which might influence some individuals to claim benefits sooner.
Key terms
Full Retirement Age (FRA)Delayed Retirement CreditsAuxiliary BeneficiariesSurviving Spouse BenefitsDivorced Spouse BenefitsIndependently Entitled Divorced Spouse BenefitsProtective FilingBenefit WithholdingVoluntary Overpayment
Test your understanding
- What are the earliest ages at which different types of Social Security benefits can be claimed?
- How do delayed retirement credits work, and why might they incentivize waiting to claim benefits?
- What personal factors should someone consider when deciding whether to claim Social Security at 62, full retirement age, or 70?
- How can working while receiving Social Security benefits before your full retirement age affect your monthly payments?
- What steps can be taken if you realize you filed for Social Security benefits too early?