I am reaching the age at which I
must give serious consideration to the age at which I should apply
for retirement benefits from social security. I have worked since
age 16 paying FICA taxes with every pay check. I really would like
to start to collect back on what I paid in as soon as I can, but is
that a good idea?
Luckily, I have had a job I enjoyed working, and therefore had sufficient funds so that I did not need to consider an election of social security benefits at age 62, and have been able to wait to the threshold of my 66th birthday.
My spouse worked at a very good job until she was 64 years of age. She is now approaching 65 years of age.
The issues that now face me are two: Take benefits at age 66? File for benefits at age 66 and suspend?
Wait to age 67 and file? Wait to age 70?
I have written in a previous blog discussing this issue, but because it now affects me, I have decided to revisit the issue.
The first consideration is do we (my wife and I) have sufficient income to supplement the lower benefits received under a file and suspend action? If we do not, it simply becomes a decision to file at age 66.
To file and suspend, you must reach your full retirement age (FRA). You cannot suspend benefits prior to reaching FRA. You should check your FRA because it is a moving target (an excellent site- www.ssa.gov/myaccount). For people born between 1943 and 1954, FRA is 66 years.
Suspending benefits means to ‘stop sending me checks’. I will contact you at a later date to initiate payment. By suspending benefits, benefits increase by approximately 2/3% for each month between FRA and age 70 (there is no benefit to suspend benefits after age 70). You earn approximately 8% a year by delaying receipt of benefits. Also, you do not need to defer collecting for an entire year in order to earn monthly increases. The big difference between not filing for benefits and waiting and filing for benefits and then suspending benefits, is that if you change your mind and have suspended benefits, you can ask to have the suspended benefits paid. They will be paid at the rate that had been due you at your FRA, you lose the increase in benefits that accrued during the suspension period.
If I can afford to pay my necessary living expense, during a suspension period, there is a real benefit to suspend benefits for some period of time.
What is hoped to be gained by a file and suspend strategy for my wife and I is a means to start spousal benefits for her while allowing my retirement benefits to continue to grow. The idea is once I reach FRA to apply and suspend retirement benefits, than my wife, at her FRA, has an option to collect spousal benefits on my account. Spousal benefits allow my wife to collect benefits based upon my working record, while my benefits continue to grow. The rules require that a party file and suspend before consideration of spousal benefits become an issue. A party cannot delay filing and have his/her spouse then claim spousal benefits on the non-filers account.
Since my wife worked numerous years, for this to work for us, she would have to wait for her FRA. If my wife had not worked, or worked at low paying jobs, etc., so that her own earning record supports minimal benefits at her retirement, then she could at 62, 63, etc., up to FRA, participate in the suspend and file scenario.
(There needs to be serious consideration to the benefit the wife will receive in her own name if she is under her FRA and wants to claim spousal benefits. If based upon her own work record, her retirement amount is higher than the spousal benefit, she will receive her own benefit and not the spousal benefit. She has also locked in her benefit amount by her early retirement.)
When my wife reaches FRA, based upon my prior filing and suspension of benefits, allows her to file and suspend her benefits and then claim spousal benefits on my account. Spousal benefits are paid and both accounts will earn interest until retirement benefits are claimed, or age 70 is obtained.
At this point I think the correct decision for my situation is to apply and suspend benefits. If I need the money later, I can request accrued payments, if not I can take advantage of the increase benefits.
No comments:
Post a Comment