Deciding when to claim Social Security benefits is a critical decision that affects how much you receive. Here are three signs it might be the perfect time to start collecting, based on information from The Motley Fool.
Key Points
- Claiming benefits before your full retirement age reduces them, while claiming after increases them.
- Knowing your break-even age can help you decide between two claiming age options.
- You can only claim spousal benefits if the primary claiming spouse is currently receiving benefits, as noted by The Motley Fool.
As you approach retirement, there are a few decisions you should consider to make sure you’re as financially prepared as possible. This includes when you want to start taking withdrawals from your retirement account(s), how to adjust your investments, and when to claim Social Security. All the decisions are important, but especially your Social Security claiming decision because it permanently affects how much you receive in benefits.
1. You’re aware of how when you claim affects your benefits
In Social Security, your primary insurance amount (PIA) is your base monthly benefit that you’ll receive if you claim benefits at your full retirement age. You don’t have to claim benefits then, though; you can claim before or after that age, but your monthly benefit will be adjusted accordingly. According to The Motley Fool, if you claim benefits before your full retirement age, the monthly amount is reduced by 5/9 of 1% monthly for the first 36 months.
2. You know what your break-even ages are
In Social Security, your break-even age is when the total lifetime benefits from claiming at one age equals the total from claiming at another age. Knowing this can help put into perspective the trade-off you’re making by claiming early and taking lower benefits or delaying benefits and receiving a higher monthly payout. The break-even age between 62 and 70, for instance, is 80.4, as reported by The Motley Fool.
3. Your spouse wants to claim spousal benefits
Social Security spousal benefits allow one spouse to claim benefits based on their partner’s earnings record. It’s a good route to consider when one spouse is a much higher earner (meaning higher monthly benefits) or when one has an inconsistent work record. Claiming spousal benefits allows you to receive up to 50% of the claiming spouse’s PIA, according to The Motley Fool.
For more information on maximizing your Social Security benefits, consider consulting resources from The Motley Fool or other reputable financial advisors.
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