You can boost your annual Social Security benefit through a fancy strategy often referred to as delayed filing.
Your Social Security Benefits are calculated using a formula called the primary insurance amount, or PIA. The way it works is that people who wait to start receiving Social Security until their full retirement age (currently 66) receive 100 percent of PIA.
On the other hand if you take your benefits early at 62, the first year of eligibility, you only get 75 percent of PIA Filing later means higher social security payments for life. Of course, if you don’t last that long, it may not have been such a wise move.
However, there is a way to boost lifetime benefits for married couples. Here is how to do it.
The spouse with the higher PIA (typically the man) files for benefits at his full retirement age, then immediately files a notice to suspend payment of those benefits. That permits the lower-PIA spouse to file for a spousal benefit, which is equal to half the husband’s benefit. That gets some social security payments flowing to the household.
In the meantime the husband continues to accrue higher benefits until he files to start payments. The increase in benefits is 4-8% per year for delaying taking them. In addition, there is no longer an increase once you hit 70.
When the husband finally files for benefits, the wife converts to her own full benefit.The end result is that the couple benefits from higher individual benefits for the rest of their lives.
If the husband dies first, the widow then converts to a survivor benefit, which is equal to 100 percent of her spouse’s benefit. The benefit can be as much as 10-20%.The delayed filing strategy allows married couples to start receiving some benefit to meet living expenses while they wait to get more later.
If you have the right to claim Social Security survivor benefits, you can choose between your own benefit or your survivor benefit allowing the other to continue to grow. So, you can claim one at age 62 and allow the other to grow and then take the higher amount at full retirement age or later.
By doing this, when the wife turns 62, she can claim spousal benefits (35% of her spouse’s benefits, 50% if 66), even if she never worked, providing additional income and allowing her husband to maximize his benefit by delaying payments until he reaches age 70.
Another technique is often referred to as claim now, claim more later. It lets you claim spousal benefits now and then switch to your own benefit later. This approach lets you keep building up your Social Security benefit while you receive payments based on your spouse’s work history. This may be advantageous to couples who both want to retire. However, instead of the husband and wife each claiming their own benefits, the person with the lower benefit starts collecting Social Security, and the spouse claims spousal benefits—allowing her higher benefits to continue to grow. You can only use this strategy if you wait until you’ve reached your full retirement age of 65-7 to claim your benefits.
There are a variety of Social Security maximization strategies. However, the main ones are:
- Delayed retirement to earn increased benefits
- Sequencing and timing of retirement and spousal benefits
- File and suspend strategies for married couples
- Starting, stopping and restarting the receipt of benefits
- Early retirement to obtain child’s benefits and child in care spousal benefits
- Early widow start if deceased took retirement benefit early