You May Be Able to Claim Social Security Benefits Now and Claim More Later

UPDATE: A new law that will go into effect on April 29, 2016, will phase out this strategy. If you are 62 or older by the end of 2015, you will still be able to choose which benefit you want at your full retirement age. Under the new law, when workers who are not 62 by the end of 2015 apply for spousal benefits, Social Security will assume it is also an application for benefits on the worker's record. The worker is eligible for the higher benefit, but he or she can't choose to take just take the spousal benefits and allow his or her own benefits to keep increasing until age 70.

Although you can begin receiving Social Security benefits anytime after age 62, the longer you wait, the higher the benefit you will receive. But many people need money right away and cannot afford to delay. If you are married, there is a strategy that may allow you to claim some benefits immediately and then claim more benefits later.

First a little background: You have three options for when to begin taking your Social Security retirement benefits: You may begin taking benefits between age 62 and your full retirement age, you can wait until your full retirement age (which varies depending on your age), or you can delay benefits and take them anytime up until you reach age 70. Your benefit will increase by 6 to 8 percent, depending on when you were born, for every year that you delay, in addition to any cost of living increases.

The "claim now, claim more later" strategy outlined in a new study by the Center for Retirement Research at Boston College is based on the fact that married individuals are entitled to either a Social Security benefit based on their own earnings or to a spousal benefit equal to one-half of their spouse's full retirement benefit. When you reach full retirement age, you can choose which benefit you want to take. If you choose your spousal benefit, you can continue building up delayed retirement credits for your own benefit. Then at age 69, you can claim your maximum retirement benefit and stop receiving the spousal benefit.

The study gave an example of how this "claim now, claim more later" strategy would work. According to the study, it is usually optimal for a wife to claim her own early retirement benefits because wives typically earn less than their husbands but also usually outlive them, and once the husband dies, the wife is entitled to his benefit as a widow. Therefore, according to the strategy, the wife would claim early retirement benefits at 62 while the husband waited. Once the husband reached his full retirement age, he would claim a spousal benefit. Then at 69, the husband would claim the maximum amount of his retirement benefit and stop receiving the spousal benefit. If the wife earns more than the husband, the strategy would work in reverse.

Illustration: Beginning at age 62, Mrs. Brown gets $978 a month in early retirement benefits. Beginning at age 66, Mr. Brown receives a spousal benefit of $767 a month (50 percent of his wife's full retirement benefit of $1,534/month). Then, at age 70, Mr. Brown stops receiving the spousal benefit and begins receiving $3,209 a month (the maximum amount of his retirement benefit).

To read the study, click here.

For more information on Social Security benefits, click here.