Claim Your Social Security Benefits Based on Your Circumstance

Published August 8, 2017
While you can claim your Social Security benefits at different times, there isn’t a single age that is right for everyone. It’s important to consider these facts when deciding which age is right for you.
  • There is no right age to claim your Social Security benefits
  • The right age to claim will depend on your a series of factors, such as your marital status, projected longevity and your financial needs

Waiting until 70 will get you the highest Social Security benefit, but that doesn’t necessarily mean it’s the right time for you to apply. The right age to claim benefits depends on your projected longevity, your marital status, your financial needs – current and estimated, and your employment status. For some, it could make more sense to begin collecting payments at the Full Retirement Age, or even earlier. Consider the following factors when making your decision:

Your Expected Longevity

If you think you may have a long life in retirement, then you’ll need to maximize your income and ensure it lasts you for the rest of your life. The longer your life expectancy, the more sense it makes to delay claiming Social Security until age 70.

Your Marital Status

Single applicants benefit from delaying the receipt of their own benefits. But did you know that your spouse could also benefit from waiting to claim spousal benefits? Your husband or wife can take spousal benefits as early as age 62, but that may result in a benefit that’s as little as 1/3 of the amount they’re eligible to receive.
If your spouse instead defers until Full Retirement Age, then he or she can collect a stream of income that’s equal to 50% of your Social Security benefit.

When You Need the Money

Personal circumstances play a major role in the timing of Social Security benefits. There are times in which some retirees have to begin receiving their income as early as possible. An individual who is forced to retire earlier than anticipated due to layoffs or illness may decide to claim Social Security benefits earlier.

Reductions in Income Payments While Simultaneously Working and Receiving Benefits

If you are under the Full Retirement Age (usually 66 or 67) and you make more than Social Security’s yearly earnings limit ($15,720), Social Security will deduct $1 from you benefit payments for every $2 your income exceeds the earnings limit. During the year in which you reach Full Retirement Age, Social Security will deduct $1 from your benefit payments for every $3 you earn over a different limit ($41,880 in 2016).

Claim Your Social Security

These penalties only apply to earnings before the month you reach Full Retirement Age. After that, you can receive Social Security benefits without deduction.

The Timeframe You Have to Change Your Mind If You Initially Take Your Benefits Early

In the event you initially decide to take Social Security benefits early, and you later decide you should have waited to claim, you can withdraw your application within the first 12 months of starting to receive income. You will have to repay the amount that has already been paid to you. After that, you can start benefits at a later date and receive a boost to your income from Delayed Retirement Credits.

The Three-Legged Stool

The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:

  1. Social Security – This is the government’s retirement plan for us. As long as you’re working (to earn the credits required addressed above) and paying taxes, you’re earning Social Security credits. When you retire, you’ll start receiving monthly Social Security income that will continue for as long as you’re alive.
  2. Pensions – This is the form employer retirement plans used to take. They provided a steady monthly paycheck no matter what happened in the market and no matter how long you lived. Because Social Security only covers, on average, 40% of one’s retirement expenses, people leaned on pensions for the rest. The problem today is that the second leg of the three-legged stool is wobbly or gone. Instead of offering pensions, employers are providing 401(k)s and matching contributions, which helps with the third stool.
  3. Personal Savings – So that you have access to money outside of, and beyond, monthly Social Security and pension checks, you need to save on your own. This money is generally invested differently to serve two purposes. First, money invested in liquid money market or savings accounts provides a cushion and access to extra cash in case of emergency. Second, money beyond that can be invested in the market for a high potential return. This is the money you’re comfortable losing.

How to Supplement Your Social Security

According to the Social Security Administration, individuals aged 65 and over in the top quartile for income (an average of $78,180) received only 18% of their income from Social Security. So where does the remaining 82% come from?

1. Enroll in the Personal Pension

Your Personal Pension is backed by insurance companies which guarantee that for every dollar you contribute, you will receive a certain amount of income every month starting when you retire. Unlike an income annuity, the Personal Pension allows you to contribute incrementally, in smaller amounts and at a younger age, similar to the way you’d put aside money in your savings account or 401(k).

2. Purchasing an income annuity

Similar to the Personal Pension, income annuities provide a guaranteed lifetime stream of income during your retirement. However, instead of contributing over time, you pay a lump sum upfront to purchase your annuity from an insurance company. Then, the insurance company sends you a series of payments for the rest of your life.

How Can I Start a Personal Pension?

A Personal Pension is a contract between you and top rated insurance companies. By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed income available in retirement. Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check.

Here you can see what contributing to a Personal Pension will guarantee you in retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

You can continue with the enrollment process on your own or fill out the information to have one of our specialists follow up with you by starting with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

How Can I Purchase an Income Annuity?

At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.

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From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.

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Nimish Shukla

Nimish Shukla

Financial Planning Professional

Nimish has spoken with thousands of customers about retirement spending. As a CFA Charterholder and licensed fixed annuity producer he values the importance of building an income stream for retirement. In addition to his work at Blueprint Income he is also a regular contributor to Nerdwallet.