Coordinate Good Social Security Age with Social Security Benefits for Spouses

SmartMoney advises on a good Social Security age, Social Security benefits for spouses, and reduction in Social Security from work.

When should you take benefits? What Is a Good Social Security Age?

You can start drawing Social Security payments at age 62, but your full Social Security age is the age at which you can claim full benefits. This will be somewhere between 65 and 67, depending on the year you were born.

If you take benefits before full Social Security age, your payments will be reduced. Conversely, you can delay taking Social Security after full retirement age. The amount of your future benefits will increase until you reach age 70.

You need to sit down with your spouse and Social Security's Retirement Estimator (www.ssa.gov/estimator) to see what's best for your household. You may well find it's worth waiting to take benefits, at least until you reach full Social Security age.

Human beings tend to take money as soon as it's available, whatever the circumstances. Half of all men, in fact, claim Social Security by the age of 63. Many surely need the cash. Just as surely, others are shortchanging themselves and their widows. Make sure you work through your numbers thoroughly.

Three Techniques from Boston College

Beyond these basic considerations, consider three unusual but perfectly legal Social Security strategies that analysts at the Center for Retirement Research at Boston College explored in an important study released in August 2009.

First, if your husband or wife retires, you can claim spousal benefits, keep working and then switch to your own benefits later, when you retire. This approach lets you build up credits while you collect at least some payments. And it's very helpful if you and your spouse want to retire at different times.

Second, when you reach full Social Security age, you can claim benefits but suspend payment until a later date. Your husband or wife can then take Social Security benefits for Spouses right away while the value of your own future payments rises. This technique is particularly useful if you and your spouse have very different earnings histories. If your wife, for example, will not qualify for substantial benefits on her own, she can still collect monthly checks while yours are suspended.

Third, if you claim Social Security early, you can reclaim at a higher benefit level later -- as long as you're able to pay back all the benefits you've received so far. Suppose you started taking $1,000 a month at age 62 and have collected $50,000 so far but would be eligible for $1,300 a month if you retired today. If you give the government back its $50,000, it will treat you as though you never claimed in the first place -- and pay you the higher monthly benefit.

Social Security Benefits for Spouses and Survivor Social Security Benefits

You can claim benefits based on either your own earnings history or your spouse's. Spousal benefits are equal to 50 percent of what your husband or wife gets if you take them at full retirement age, less if you take them early. And if your spouse dies, you are eligible to receive his or her full monthly amount as a survivor benefit.

Reduction in Social Security from Work

You can continue to work while receiving Social Security, but if you do so before reaching full Social Security age, you will face a reduction in Social Security benefits.

In the years before you hit full Social Security age, the system will withhold one dollar for every two you earn over $14,160.

In the year you reach full retirement age, the program will hold back one dollar for every three you make over $37,680; beyond your full retirement age, you can work with no penalty.

Topic: Social Security

Subtopics: Introduction • Social Security as Typical Retirement Income • The Importance of Credits • Social Security Age • History of Retirement Age • Calculating Social Security Benefits • Spousal & Survivor Benefits • Reduction in Benefits from Work • Income & Benefits • Windfall Elimination Provision • Government Pension Offset • When to Retire? The Break Even Point • When? Personal Circumstances • When? Family Circumstances • Earnings Statement & Benefits Calculator • Income Tax on Social Security • Tax Examples • Social Security Problems • Social Security Solutions • Tips from SmartMoney • Tips from Wichita Falls