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Deciding The Right Time To Claim Social Security

NPR icon by NPR Staff
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When it comes to claiming Social Security benefits, there is no magic age. Today's boomers can begin collecting full benefits at 66, tap in early for a modified benefit at 62 or delay receiving benefits until 70.

But the importance of making a smart decision of how and when benefits are claimed can't be underestimated, says Mary Beth Franklin of Investment News.

"For the majority of American retirees, Social Security is the only form of guaranteed cost-of-living adjusted income they will ever see, and for many retirees, it is their only source of income," Franklin tells Morning Edition's David Greene

It may be tempting to start collecting Social Security benefits at 62, but Franklin suggests getting the biggest benefit that you're entitled to. "And I'll tell you, when you're 85 you're going to be really glad you've got a big benefit," she says.

Begin at 62 or 66?

"Let's say you're entitled to $1,000 a month at your normal retirement age of 66. If you take it at 62 you're going to take a 25 percent haircut the rest of your life. So you will get smaller checks for a longer period of time.

"If you have health issues and are unlikely to live to your normal life expectancy — which for most Americans is about 78 or 80 — go ahead, take it early. But the one caveat is if you plan to keep working while you claim Social Security benefits, you're going to end up losing some of those benefits, basically giving them back. So my No. 1 rule is if you plan to keep working, don't take Social Security benefits before your normal age of 66. Once you get to 66, this thing called the earnings cap that can claw back some benefits goes away."

Married couples: lock in the largest benefit

"There are enormous opportunities for married couples. What most married couples should think about when they make a decision, it's not two individual decisions. You're an economic unit. What most married couples want to do is lock in the largest possible survivor benefit because when one spouse dies the largest benefit will remain. So you want the highest earner, which, frankly, is still usually the husband, to delay taking benefits as long as possible because not only will he get a bigger benefit during his lifetime, but if he dies first the wife will then get 100 percent of what he got during his lifetime. Her smaller benefit would go away."

Divorce: 'til death do us part (or at least 10 years)

"The least understood fact about Social Security is that many divorced spouses are entitled to benefits on their ex. The basic rules are the marriage must have lasted for at least 10 years and you must be currently unmarried. Under those circumstances you can claim benefits on your ex as long as he or she is at least 62 years old. They don't even have to be claiming their benefits, as long as they're eligible to claim benefits ... and even if you were married to other people in between."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

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