56 KIPLINGER’S PERSONAL FINANCE^ 03/2020I’m deciding at what age I’ll claim
Social Security benefits. How does
my life expectancy factor in?
First, the basics: You can start getting
benefits as early as age 62, but you’ll
receive up to 30% less in each check
than if you wait until your full retire-
ment age, which is 66 for those born
from 1943 to 1954 and gradually rises
to 67 for those born in 1960 or later.
For each year after your full retire-
ment age that you wait to start bene-
fits until the maximum age of 70,
you’ll get an 8% boost in delayed-
retirement credits.
Social Security actuaries aim to set
payouts so that if you die at the time
your life expectancy projects, you’ll
receive about the same total amount
of benefits no matter when you start
claiming them. If you are single and
have never been married, spousal and
survivor benefits aren’t a concern,
so your de cision about when to claim
hinges on how long you think you’ll
live. If you can afford to postpone tak-
ing benefits and are deciding whether
to hold out to age 70, a key question
is whether you expect to live past 80.
Research shows that at about age 80,
the cumulative amount you’ve re-
ceived in benefits is approximately the
same whether you started benefits at
age 62, 70 or somewhere in between.
As a rule of thumb, “if you’re single
and believe that your life expectancy
is less than 80, you should claim before- If you think you’re going to live
past 80, wait until 70,” says Bill Meyer,
CEO of Social Security Solutions, which
provides tools to help recipients deter-
mine when to claim benefits. A person
who is eligible to receive $2,000 a
month at a full retirement age of 66
and lives to 95 would receive $198,000
more in total benefits if he or she waited
to claim at age 70 instead of at 62.
You can enter your gender and birth
date at http://www.ssa.gov/oact/population
to get an estimate of how many more
years you may live at your current age
as well as at 62, your full retirement
age and 70, if you haven’t reached
those ages yet. But you should also
account for your health, your lifestyle
and your parents’ longevity (especially
that of your mother) as you gauge your
potential life span.How can my spouse and I make the
most of our combined benefits?
Married couples have more to con-
sider to maximize their benefits, but
they also have certain advantages.
Even if one spouse never earned in-
come covered by Social Security, heor she may claim benefits based on
the other spouse’s record, as long as
the other spouse has started claiming
benefits. If you claim spousal benefits
at your full retirement age, you get
50% of your spouse’s primary insur-
ance amount (PIA)—that is, the bene-
fit your spouse is eligible to receive at
his or her full retirement age. If your
husband or wife waited to claim bene-
fits past full retirement age, the calcu-
lation of your spousal benefit does
not include any delayed-retirement
credits. And if you claim your spousal
benefit between 62 and your full re-
tirement age, the benefit is reduced.
If both members of a couple can
claim benefits based on their own
work history, the lower earner may
still get spousal benefits if his or her
own benefit is less than half of the
other spouse’s PIA. In that case, the
lower earner receives his or her own
benefit plus an additional amount so
that the total payout adds up to the
maximum spousal benefit for which
the lower earner is eligible.
Beyond the ins and outs of spousal
benefits, there’s the question of when
each spouse should start benefits.
Ultimately, the spouse with the higher
PIA should determine when to start
benefits based primarily on the life
expectancy of the spouse who is ex-
pected to live the longest, says Meyer.
If at least one spouse is likely to live
past 80, it often makes sense for the
higher earner to delay claiming until
age 70. Meanwhile, the lower-earning
spouse may choose to claim his or her
own benefits as early as 62 to gain
some income. When one spouse dies,
the surviving spouse receives 100%
of the highest benefit.
Those who were born before Janu-
ary 2, 1954, can use a strategy called
“restricting an application to spousal
benefits.” Using this method, the
higher-earning spouse can temporar-
ily take a spousal benefit, which may
prove lucrative in the long run. At full
retirement age or later, the higher
earner applies for spousal benefits
while the lower earner collects his orRETIREMENT
KipTipTaxes on
Social Security
Some seniors are surprised—and
dismayed—to discover that a portion
of their benefits may be taxable. If
all of your income comes from Social
Security, your benefits probably won’t
be taxed. But if you have income from
other sources, such as a part-time job,
withdrawals from an IRA or a pension,
up to 85% of your benefits could be
taxed.
Social Security taxes are based on
your provisional income, which is cal-
culated by taking your adjusted gross
income, not counting Social Security
benefits, and adding in nontaxable in-
terest and half of your Social Security
benefits. If your provisional income is
below $25,000 and you file taxes as
single or head of household, or less
than $32,000 if you file a joint return,
you won’t owe taxes on your benefits.
If your provisional income is between
$25,000 and $34,000 and you’re sin-
gle, or between $32,000 and $44,000
and you file jointly, up to 50% of your
benefits may be taxable. If your provi-
sional income is more than $34,000
and you’re single or more than $44,000
and you’re married filing jointly, up to
85% of your Social Security benefits
may be taxable. In addition, 13 states
tax Social Security benefits.