A good rule of thumb is the longer you expect to live, the more likely that delaying the start of social security benefits will pay off. After you reach what the government calls “full retirement age” (FRA), which ranges from 65 to 67 years old (depending on the year you were born), the amount of the checks you receive will rise by eight percent for each additional year that you wait—until you reach age 70. The rate is less than eight percent for those born before 1943.
After you die, your spouse can claim survivor’s benefits equal to your full retirement benefits, but only if you wait until full retirement age to start collecting. If you start collecting early, the reduced benefits carry over to your spouse after you die. However, if you postpone the start of benefits past full retirement age, your spouse’s benefits do not increase further.
There is an alternate strategy that is often overlooked. If you are healthy and expect to live well into your 80s, consider filing for benefits at your full retirement age but then immediately suspend those benefits. Your spouse can’t file for spousal benefits until you file for your own benefits.
Under this scenario, your spouse can start collecting benefits as a dependent as soon as you file, based on your salary history. A person age 62 or older is entitled to receive benefits of up to 50 percent of his/her spouse’s benefits as a “dependent” of the spouse, as long as the person is not collecting benefits based on his/her own salary history.
At the same time, by immediately suspending your benefits, you allow the size of your future checks to further increase for each year you wait to resume collecting benefits until you reach age 70.
Dan Busby is a certified public accountant, acting president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.