Social Security claiming tips: Look before you leap.

When should I start my Social Security benefits? It's a common question from people approaching retirement. For single folks, it's already difficult to provide an easy answer that's not full of the phrase "it depends." For married couples, it can get complicated. And, for those with limited resources, claiming early may be a necessity. So, it's important to understand how the Social Security claiming rules may affect your overall retirement planning and various strategies that may be available. Here are a few considerations to help with your decision.

1. You'll need an estimate of your Social Security benefits.

When we think of our Social Security monthly benefit, this is known as your primary insurance amount, or PIA. It's the monthly amount you'd receive based on your full retirement age, or FRA. Get the most recent estimate of your – and your spouse's – PIA from the Social Security Administration, which will be based on your earnings histories. If you don't have a recent statement or online account, then create your own account at the Social Security Administration website. Once your account is set up and you're logged in, you'll be able to see your estimated PIA now and over time. Keep in mind that you'll receive 100% of your PIA at your FRA.

For more definitions and information, see:

• PIA Opens in a New Window‍ ‍ ^{See note 1}
• FRA Opens in a New Window‍ ‍ ^{See note 1}
• Social Security Account Opens in a New Window‍ ‍ ^{See note 1}

2. Single or married, it generally pays to play the "long game."

When deciding about Social Security claiming, it's important to think long term: A delayed claiming can often lead to a larger lifetime benefit.

This chart uses an example calculation to show how the benefit amount is reduced or increased depending on when you claim your Social Security benefit Opens in a New Window.‍ ‍ ^{See note 1} The area below age 66 shows how this individual's benefit is decreased by starting benefits earlier than FRA. For example, if this person claims early at age 62 and lives until age 95, the individual would have given up about $76,500 in lifetime benefits compared to waiting until age 66.

Source: SSA.gov. Hypothetical illustration for individual where FRA benefit amount at age 66 equals $1,500 per month

Important: Once you claim, your benefit is generally set for life. For married couples, the claiming decision by one spouse can have a dramatic effect on the other's benefit.

3. Life expectancy, differences in age and earnings matter a lot for married couples.

If you're married, how old you are now and how long you each expect to live are key factors when determining claiming strategies. You can estimate your life expectancies using the Social Security Retirement & Survivor Benefits: Life Expectancy Calculator Opens in a New Window.‍ ‍ ^{See note 1}

To help understand the tradeoffs involved for married couples when we factor in different career earnings histories, age differences and life expectancies, consider this example and scenarios for a married couple, ages 62 and 59. We'll look at the total lifetime benefits if both spouses claimed benefits early (age 62), at FRA (age 67) or at the latest (age 70), and assuming each dies at an early age (75), normal age (85) or older age (95).

Scenario 1

We'll assume the earnings histories for our couple are different, resulting in unequal PIA: Spouse 1 PIA equals $1,500 per month, and Spouse 2 PIA equals $750 per month.

Source: SSA.gov, and www.broadridgeadvisor.com

The chart shows the lifetime benefits based on when a couple claims and when they both die. The first three columns show the lifetime benefits when both claim early (62) and live until ages 75, 85 or 95. The middle three columns show the lifetime benefits when both claim at normal age (67) and live until ages 75, 85 or 95. And, the last three columns show the lifetime benefits when both claim at the maximum age (70) and live until ages 75, 85 or 95.

Scenario 2

Even for couples with similar earnings histories, the same pattern in the chart still holds true. Unless both partners expect to die early (age 75, in this case), claiming later than age 62 can provide more total lifetime benefits.

We can see from these scenarios that for a couple with similar or with different earnings histories, the only time it made sense to claim early (at age 62) was if they both lived short lives — both dying when they each reached age 75. Otherwise, whenever each person lived until age 85 or 95, claiming at FRA or later provides more total dollars over the combined lifetimes.

Important: A lot of folks assume that the lower-earning spouse will automatically receive half of the higher earning spouse's benefit, once they claim. Hold on though, although a spouse can choose to retire as early as age 62, doing so may result in a 32.5% reduction in the benefit amount, based on the other spouse's primary insurance amount, according to the Social Security benefit calculation for spouses Opens in a New Window.‍ ‍ ^{See note 1}

In the scenarios, we assumed that the married partners died within just a few years of each other. What happens if Spouse 1 lived to an average lifespan, but Spouse 2 lived a long life?

Scenario 3

Earnings histories are different. Spouse 1 PIA equals $1,500 per month, and Spouse 2 equals $750 per month, but Spouse 1 lives until age 85 and Spouse 2 lives until age 95.

Source: SSA.gov, and www.broadridgeadvisor.com

In scenario 3, by both claiming at age 62, versus the better strategy of Spouse 1 delaying claiming until age 70 and Spouse 2 delaying claiming until age 69, they would give up almost $167,000 in lifetime benefits.

These are just a few examples of the multiple possible claiming scenarios. That's why it's important to have a good estimate of each of your life expectancies, and to seek financial guidance to see how the Social Security claiming decision fits in your overall retirement strategy.

Key takeaways

Single or married, consider the following tips as you evaluate your Social Security claiming options:

1. Factor longevity and earnings history.

For single individuals, or couples with long life expectancies, it may be wise to delay claiming by both to maximize lifetime income.

Singles or couples with short life expectancies may want to consider claiming benefits earlier. Couples with large differences in their career earnings record may want to consider a strategy in which one claims on the other spouse's benefit.

2. Consider your existing resources.

Anyone with limited resources may need to claim early to cover retirement living expenses.

3. Don't rely on general rules of thumb. Get help instead.

Your Social Security claiming decision is too important to leave to chance. Seek advice and guidance from a source who can see how Social Security fits in your overall retirement income strategy. They can give you various scenarios based on your needs.