Consider Joe’s story: When we first met Joe at our office, he was still employed at age 75 and in great health. Joe wanted to retire within the next few years and needed to make sure all of his ducks were in a row. Unfortunately, the first one, Social Security, was not. Joe thought his check would continue to grow at 8% per year until he retired. The check did grow but stopped increasing when Joe turned 70.
After calling the SSA immediately, he was told his monthly check could begin in the coming months, but since he didn’t file at 70, all of the $2,500 checks he could have been collecting were gone, totaling over $150,000 in lost money. If you know someone who is approaching or has already turned 70, please let them know to reach out to start collecting their monthly Social Security benefit checks.
When to start collecting can be a tricky decision
The ideal time to claim Social Security can be a difficult decision to make. Choosing the wrong time can cost your family hundreds of thousands of dollars. My grandmother Marie chose to collect Social Security when first eligible at age 62. Her benefit was based on my grandfather Bill’s work record, since his monthly check was more than double hers.
If his monthly benefit was $1,000 and hers was $400, my grandmother would have collected her $400 check plus a $100 spousal benefit based on my grandfather’s work record at full retirement age. They both continued to collect their checks until my grandfather passed away at age 79.
At that point, Marie had a choice to continue collecting her check or Bill’s, but not both. She chose to collect his higher monthly benefit check instead of hers and continued to collect it until she passed away at age 91.
Working while collecting Social Security
Here’s a true-or-false question for you: If you continue working and earn too much income, will Social Security keep part of your check forever? The answer? False.
For 2024, the earnings limit to collect Social Security before FRA is $22,320. According to the SSA, if you’re younger than full retirement age during all of 2024, it must deduct $1 from your benefits for each $2 you earn above $22,320.
Many people assume if you earn more than that, you will lose the amount withheld forever. Fortunately, if money is withheld, it will be returned over time and not lost in a vanishing check drawer.
Timing could be everything if your ex-spouse dies
When a spouse dies, claiming benefits can get a bit complicated if there is more than one widow/widower. Famous comedian and late-night television host Johnny Carson is an interesting example here. Carson was married four times. Three of his marriages lasted longer than 10 years, and the other ended after nine years. Now, according to the rules of Social Security, you must be married for at least nine months to qualify for survivor benefits.
An ex-spouse can collect a survivor benefit if married for at least 10 years. Eligible children under 16 can also receive survivor benefits, worth up to 75% of the deceased’s benefit. So, three of Carson’s spouses could collect off of his record, but the one married to him for only nine years could not.
As retirees navigate the many complexities of Social Security, these strategies offer valuable opportunities to save on taxes, optimize payments based on personal goals and enhance income security in retirement. Consulting with an independent fiduciary specializing in Social Security timing and utilizing online resources can provide personalized guidance tailored to individual circumstances.
By proactively exploring all the available options, retirees can maximize the full potential of their Social Security benefits and enjoy a more secure retirement.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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