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With Social Security, This Matter More Than Anything Else – The Motley Fool



It is a great controversy that surrounds when the best time to claim social security benefits is. Some believe that you should get there as soon as possible and claim benefits from your first opportunity when you get 62. Others point to the opportunity to get bigger monthly payments if you are willing to wait, with big increases from waiting to full Retirement age and even greater increases if you can delay until you reach 70 years of age.

Analyzing your best possible alternative can take a lot of work. If you want to come up with the most complete answer, consider factors such as whether you're still working or retired, how much you've earned during your career, what financial resources you have other than social security, and what your current one is. Health situation tells you about the chances of staying longer or shorter than your estimated life expectancy.

But when it comes to asserting social security, there is really only one thing that matters more than anything else: whether you have other family members who want to rely on your work history to claim their own benefits. If the answer is yes, then the odds hit that the right strategy would be to wait instead of claiming early.

  Three social security cards with brass key on top.

Image Source: Getty Images.

When You Can Keep Things Simple

The beautiful social security is that the program was set up to try to make it relatively insignificant exactly when you claim your benefits. When you look at how the Social Security Administration adjusts monthly benefits depending on when you claim, you can see that it takes into account actuarial projections. The general idea is that if you claim early, you will receive more payouts, but they will be smaller than if you were waiting. If you live to the expected lifetime, everything should even exclude. Live longer and you would be smarter to wait, but if you didn't do it that long, you'd be better off claiming early. Once you have made a decision about your own likelihood of surviving your life expectancy, you are essentially finished.

The same is true even in many family situations. For example, if you are married and you and your spouse work, both of you will have a work history that may require social benefits. Unless the difference between your two wages is extremely large, you will each be better off claiming your own retirement benefit than seeking to claim a spousal benefit based on the other spouse's work history.

The Complexity of Social Security Family Benefits [19659007] However, there are still some families where only one spouse works throughout their marriage. For these families, the required decision becomes more complicated because there are several ways in which the two spouses must coordinate to get the best overall result:

  • Unwilling spouses are not allowed to claim spousal benefits before the employer claims retirement benefits. It tends to favor having the job claimed earlier so that spousal benefits can get started – even though the monthly amount of previously claimed spousal benefits is also subject to reduction.
  • If the job goes away before the unspecified spouse, then the survival benefits paid to the unpaid spouse are based on the amount received by the employer – including adjustments to claim either early or late. In other words, with surviving benefits, the surviving spouse is at all firm with the decision made by the employer – whether that would be the best decision for the surviving spouse.

To see how this works, take an example that happens all too often. Say you have a bad health partner and an unprocessed spouse in excellent health. If the partner fails to take into account the effect of surviving benefits, the smartest choice will generally be to require early to maximize payouts with the expectation that the employer will not live to the full.

If the work partner claims early, the undocumented spouse will receive a smaller survival amount. In contrast, waiting may have resulted in the partner gaining less benefits, but the increase in what the unwritten spouse would receive in survival benefits would more than make up for the original lack.

Making the Right Security Decision [19659007] The key here is that when you can afford to be selfish with your Social Security Decision, making a smart choice is easy. But when you have to pay attention to other people, it becomes much more complicated. In many cases, it seems to you the best answer for you to be the worst possible answer for your loved ones – and therefore make an effort to make the whole story pay off.


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