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Baby Boomer's Guide to Social Security

If you are approaching retirement, it is important to determine the best strategy for claiming your social security benefits.  Social Security is an integral part of your financial plan, and making the best choices can have a significant impact on your lifestyle in retirement. Now that baby boomers are either in or approaching their 60's, it is time to look at Social Security as an important source of retirement income.

To be eligible for social security, you need 40 credits, which is the equivalent of working in a Social Security covered job for at least 10 years. You may begin receiving Social Security as early as age 62, but you will not receive your full benefit until your full retirement age, which can be anywhere from age 66 to age 67, depending upon your birth year.

If you apply at age 62, you will receive 70 to 75 % of your primary insurance amount, or PIA.  If you wait and apply later, you can start receiving your full PIA. Delaying the onset of benefits past full retirement age will earn delayed credits, which will increase by 8% per year up to age 70.

The biggest question facing Baby Boomers is when to apply for Social Security. It depends upon your particular situation and your other retirement assets.  If you are not working and have few other resources, you may need to take it at age 62 with a reduced benefit.  If you are still working, it normally does not make sense to take social security since the benefit may be reduced significantly.  It is important to consider which strategy will provide the highest income over your life expectancy, and to consider if you will need  a much higher monthly benefit later in life if you plan to continue working past full retirement age.

Spousal benefits are available, and coordinating spousal benefits is one of the most complex areas of Social Security planning. There are many opportunities to maximize a married couple's combined benefits, but the rules are complicated.  A spouse can receive a spousal benefit equal to half of the other spouse's PIA.  It is important to consider whether it makes more sense for the lower earning spouse to claim under his/her own record, or to take use the spousal benefit and take half of the higher earning spouse's PIA.

Divorced clients can receive spousal benefits if the marriage lasted at least  10 years and you are currently unmarried.  If you have been divorced for at least 2 years, the other spouse does not need to apply for his benefit in order for you to receive yours.  His benefit is not reduced due to the divorced spouse filing under his record, and you do not need to know the earnings history or whereabouts of the ex-spouse to claim under his record.  You just need to present proof that you were married and divorced to the Social Security Administration and they will look up the record.

Widowhood also affects social security benefits.  The survivor benefit is based upon the deceased spouse's actual benefit if they were already receiving Social Security.  If they were not already taking Social Security, then the benefit would be based upon their PIA.  If you remarry after becoming widowed, you will not be eligible for a survivor benefit unless your are age 60 or older when you remarry (50 if disabled).  Also, one of the benefits stops upon the death of the spouse, so either you take your own benefit, or switch to the survivor benefit, and choose whichever is higher.

There are many opportunities for planning for social security, and it is important to consult someone who can determine the best strategy for you to maximize your retirement income.  If you would like advice to help you make the best decisions going into retirement, please contact me.