Personalize Your Payout Strategy
If Social Security has an essential role to play in your retirement plans, remember that how you manage it could make thousands, or tens of thousands, of dollars difference in your retirement income. So it’s important to give a great deal of thought to how you want to claim your benefits.
What’s age got to do with it?
For a long time, age 65 was Full Retirement Age (FRA)—the point where you could receive the full amount of your Social Security benefit. However, if you were born in 1943 or later, your FRA is actually age 66 or older. Please review the chart below to see how full retirement age is calculated.
| Birth year | Full retirement age |
|---|---|
| 1943-54 | 66 |
| 1955 | 66 + 2 months |
| 1956 | 66 + 4 months |
| 1957 | 66 + 6 months |
| 1958 | 66 + 8 months |
| 1959 | 66 + 10 months |
| 1960 or later | 67 |
There are other retirement age considerations. Early Retirement Age is 62, when a reduced benefit can be claimed. Delayed Retirement Age is 70. You can delay collecting benefits beyond your FRA and the amount of your benefit will continue to increase up until age 70.
When do you claim?
Regardless of your full retirement age, you can choose to start receiving monthly payouts at age 62, if you are retired or your earned income is below a certain amount determined by the Social Security Administration. (This amount is adjusted annually for inflation.) If you’re at or near age 62 and need income, this may seem an attractive alternative, but try to keep a long-term perspective before you choose it.
Be aware that taking benefits before reaching your FRA will permanently reduce the amount you receive each month. If you think your income need may be short-lived, see if there are other sources to address it that won’t affect the income you receive over the full course of your retirement, which could last 20, 30, or more years.
Also remember that each year you wait to claim your benefits can increase the amount you receive over the long term. For example, delaying claiming Social Security until age 70 instead of age 62 could increase your benefits by up to 77% based on an age 67 full retirement age. So if working longer is possible, you may want to consider it.
What’s your claiming combo?
If you’re married or in a relationship, you’ll want to look at where you both stand in relation to retirement. Is one, or both, of you still working or already retired? Depending on your personal circumstances, different scenarios could apply, including:
- Both spouses wait until 70 to claim
- One spouse claims early while the other waits
- The lower-earning spouse claims a spousal benefit at or after full retirement age while deferring his or her own retirement benefit (available only to anyone born on or before January 2, 1954, from FRA through age 70)
Your claiming strategy may be as unique as your financial circumstances and retirement outlook.
What’s your gender?
Since women, on average, outlive men, take gender into account in your claiming strategy. Look at your gene pool, retirement expectations, and whether you’ll receive dependent Social Security benefits should you lose your spouse.
Next steps
- Give your claiming strategy a great deal of thought before you act.
- See the resources available on the Social Security Administration’s website for more information.
- Consider working with a financial advisor who can incorporate your Social Security benefits into an overall retirement plan.
Wells Fargo Advisors does not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.