An overview of Social Security

Although many individuals opt to begin receiving their Social Security retirement benefits at or before their normal retirement age, there are others who decide to wait and receive their benefits at a later time.

In fact, those who wait to begin receiving their Social Security retirement benefits may actually help themselves financially in the long run. In some cases, the difference between starting benefits at age 62 versus age 70 may be close to double.

For example, a man born in 1948, who earned $80,000 per year can expect a monthly Social Security retirement check of $2,157 if he begins taking benefits at his normal retirement age of 66. If he were to begin his benefits at age 62, his monthly check would only be $1,458. However, if he waits until he reaches age 70 to begin receiving benefits, his monthly Social Security retirement benefit would rise to $3,303. This is more than double the amount he would have received per month had he started taking his benefits at age 62.

The social security earnings penalty

In addition, waiting to receive Social Security retirement benefits can also help retirees to avoid the Social Security earnings penalty if they work while retired. For example, in 2010, if someone receives their Social Security retirement benefits before reaching their full retirement age, then they must temporarily forfeit $1 in benefits for every $2 they earn over $14,160.

If a retiree reaches their full retirement age in 2010, then Social Security will hold back $1 for every $3 that is earned over $37,680. And, if someone who has not reached full retirement age earns over $42,960 in 2010, they cannot collect any Social Security retirement benefits.*

Considering a spouse’s social security benefits

Married couples have several considerations to make when deciding when to begin taking their Social Security retirement benefits. These determinations should include the fact that:

• The maximum spousal Social Security retirement benefit amount is 50% of what the other spouse will receive;
• Spouses cannot collect their own benefit and their spouse’s benefit at the same time. If both spouses are entitled to benefits and are under full retirement age, then they will always receive the larger of the two benefits;
• One spouse cannot apply for the Social Security spousal benefit until the other spouse has filed for Social Security.

Some married couples use a technique called the 62/70 strategy in order to help maximize their Social Security benefits over the long term. With this strategy, the lower earning spouse will file for their Social Security retirement benefits at age 62, and then the higher earning spouse will delay taking their benefits until they reach age 70. This allows the couple to receive the maximum amount of benefit without being penalized.

About the Author

Steve Delott has been in the insurance industry for over 35 years, is a national speaker, and provides annuity sales training and life insurance training for agents throughout the country. He was also Senior Market Advisor’s 2006 Advior of the Year. For more information, go to www.delottinc.com.