Social Security rules can seem confusing.
For many, Social Security is an important aspect of retirement income.
Because it is insufficient to cover all expenses in retirement, people should also utilize retirement savings accounts.
Although people will require more funds than those available through Social Security, the choices one makes regarding this benefit can impact the amount a person receives.
According to a recent CNBC article titled “Social Security may be a ‘treasure trove’ for you and your family. But first you have to navigate some complex rules,” understanding Social Security allows people to make better plans to meet their needs and the needs of their loved ones.
There are currently different kinds of benefits included under the umbrella of Social Security.
These payments can include death benefits, spousal benefits, widow or widower benefits, child benefits, parent benefits, mother or father benefits, grandchildren benefits, disability benefits, disabled child benefits, divorced spousal benefits, divorced widow or widower benefits, and child-in-care spousal benefits.
Requirements are unique to each of these benefits.
Even so, being unaware of your eligibility for benefits can lead to you missing them.
As “they” say, knowledge is power.
Also, the time you choose to begin taking your benefits will influence how much you can receive.
By waiting until you reach age 70, you can maximize your monthly benefit.
However, waiting beyond age 70 does not improve your benefit amount.
Although you can take Social Security beginning at age 62, you will lose about 7 percent for each year you take Social Security prior to Full Retirement Age.
Full Retirement Age is calculated based on date of birth.
Those who choose to wait until their Full Retirement Age to take benefits will receive 100 percent of the benefit.
Delaying the taking of your Social Security benefit until age 70 will increase the benefit amount for each year by 8 percent.
What does this mean?
Waiting until age 70 rather than age 62, the Social Security benefit you receive will be about 76 percent greater than for those who do not wait.
Although this is significant, it is not always the best decision for everybody.
Those with more significant health conditions or those who do not have a long life expectancy may benefit from taking Social Security earlier rather than later.
Other times, family situations play a significant role.
If you are a family with a child with disabilities, it may be better to claim Social Security earlier to trigger a disabled child benefit or a child-in-care spousal benefit.
If you do not require this, waiting until age 70 provides a greater sum for your surviving spouse.
It can allow your widow or widower to receive the entire amount of your monthly benefit as well as his or her own benefits from time in the workforce.
If you are divorced and married for at least ten years, you can be eligible for survivor benefits if you did not remarry until after age 60.
The timing of when you take your benefit may not make a significant difference in these situations.
Minor children or children of any age who are disabled, do not receive more or less based on when they claim the benefits.
The child who is disabled must have been disabled prior to age 22.
With the complexity of rules, people should educate themselves on Social Security to make the most prudent decisions based on their unique circumstances.
Reference: CNBC (Feb. 7, 2022) “Social Security may be a ‘treasure trove’ for you and your family. But first you have to navigate some complex rules”