Claiming Your Social Security Benefits

As you approach your sixties, many age-related financial and planning milestones present themselves. One primary concern is when to file for Social Security benefits, because choosing when you claim them can affect the value of your benefits.

Claiming Your Social Security Benefits - Roosevelt

For many Americans, Social Security benefits will be a primary retirement income source.

Unfortunately, many Americans aren’t confident in their understanding of this critical system.

Verifying your estimated benefits and personal information is an essential part of your strategy.

Important Milestones for Social Security Benefits Claiming

Most retirees can apply for Social Security benefits at any point from ages 62 to 70. Your circumstances during the many milestones along the way can affect the timing of your claim.

Age 59.5 – Retirement Income Penalty Ends

This is the age when you can generally withdraw money from traditional IRAs, 401(k)s, or similar retirement plans without restrictions (your 401(k) plan provider may impose harsher restrictions to gain access while you are still employed). You can also begin taking money out without an added 10% tax penalty. However, account withdrawals will still be taxed at your ordinary income tax rates.

For most people, it’s better to delay withdrawing funds from retirement accounts at this relatively young age unless they have specific financial needs. Usually, the value of maintaining tax-preferred individual retirement savings exceeds the benefit from early spending.

Age 60 – Survivor Benefits Become Available

This is the first year you can collect a Social Security survivor benefit if your spouse or ex-spouse has died (in some cases, as early as age 50 if you are disabled). Please note, to be paid survivor benefits from a former spouse, you must have been married for at least 10 years and be unmarried or re-marry at age 60 or later. This benefit is calculated based on your spouse or former spouse’s earnings record.

Claiming Your Social Security Benefits - Eisenhower

Age 62 – Earliest Option to File for Your Social Security Benefits

This is the earliest age that you could collect Social Security that is based on your own earnings record. However, you are not entitled to full benefits until you reach the Social Security designated full retirement age for your birth year. Since claiming at an earlier age will mean a permanent reduction in your benefits, it may not be the best financial decision. Moreover, claiming early may also permanently reduce the benefits available to your surviving spouse. However, certain spousal strategies may be an exception.

Age 63.5 – Bridge to Medicare

This isn’t an official milestone, but it can be an important age for laid-off workers who are offered COBRA health care benefits. COBRA benefits typically last for 18 months, and 65 is the age where Medicare medical coverage can start. Therefore, 63-and-a-half is the earliest age at which, if a person was laid off and covered by COBRA health care benefits, COBRA benefits would provide a healthcare bridge all the way until they are eligible for Medicare. Please note that COBRA coverage may not be chosen in lieu of Medicare at age 65.

Age 65 – Medicare Eligibility Age

This is the benchmark for Medicare eligibility age. Most people should sign up for Medicare benefits within the seven-month period that begins 3 months prior to the month of turning 65. It enables them to avoid lifetime surcharges on Medicare benefits. There are a few exceptions to this requirement, including active employees who are still covered under a qualified employer health plan.

Age 66 – Social Security Magic Age for Those Born Before 1955

For many retirees born 1943-1955, the “magic age” is 66. Because this is the official “full retirement age” (FRA) for many seniors, this milestone enables you to take full advantage of Social Security claiming strategies. At this age, a number of creative Social Security strategies become available. Note, however, that recent changes in tax law have changed claiming strategies open to you. For instance, the popular “File and Suspend” was no longer an option beginning in May 2016. However, if you were born prior to January 2, 1954, and have not yet filed for your retirement benefit, you may have an option to file first for a spousal or ex-spousal benefit before claiming your own retirement benefit. Consult with a knowledgeable financial professional to help you determine a suitable claiming strategy.

Age 67 – Social Security Magic Age for Newer Retirees

Social Security’s full retirement age increases from 66 to 67 for Americans born after 1954. Those born between 1955 and 1960 have a "magic age" set at 66 and some number of months, while for those born in and after 1960, the age at which you can retire with full Social Security benefits is 67.

Claiming Your Social Security Benefits - Reagan

Age 70 – Social Security Income Should Begin

This is the age at which there is no additional benefit to delay filing for Social Security benefits. People who are able to delay filing until the age of 70 have maximized their lifetime monthly Social Security benefit. They should file immediately, as there is no benefit to waiting any longer.

Age 72 – Required Retirement Account Distributions Begin

When they reach age 72, most owners of retirement accounts such as IRAs, 401(k)s or other similar retirement plans are required to start taking specified required minimum distributions (RMDs). They actually have until the following April 1st to take their first year’s distribution, after which each year’s distribution must be taken by Dec. 31 of the same year. Keep in mind that delaying the first RMD until April 1st of the following year means that a second RMD will need to be taken by 12/31 of the same year. The total required distribution is based on the total values of all your IRAs and retirement accounts as of Dec. 31st of the previous year. The total distribution may all be taken out of any one account (in the case of IRAs) or may be split among the accounts (401(k)s, for example, must satisfy an RMD independently of other accounts owned) according to their varying rules . Failure to take your required distribution(s) incurs a stiff penalty from the IRS.

Important Changes for Social Security Benefits

The Bipartisan Budget Act of 2015 eliminated two pathways for maximizing Social Security benefits, typically in the case of married couples :
  ⚫   File and Suspend Eliminated – As previously mentioned, retirees who reached their full retirement age (FRA) used to be able to “file and suspend” their own benefits in order for a dependent spouse (or child, in certain instances) to claim benefits under the suspended spouse’s This permitted the higher earning spouse to continue to let their own benefit earn delayed retirement credits to as late as age 70 while the dependent benefits were paid on that work record. However, provisions in the Bipartisan Budget Act of 2015 closed off the "file and suspend" option to retirees who hadn’t reached their FRA by late April 2016 and affirmatively elected the option. Current beneficiaries can still suspend their benefit if desired, but doing so ends all payments to spouses and children that are based on your earnings record.
  ⚫   Restricted Applications Eliminated – The Act also eliminated the “restricted application,” or the “file as a spouse first” strategy for anyone born after January 1, 1954.
As the trust that funds Social Security benefits is becoming depleted , policy discussions are underway to make further changes to future benefits to keep the program solvent. It’s therefore important, as you approach these milestone ages, to stay informed about potential changes to the program that could affect your (and your spouse’s) best strategy for claiming Social Security benefits.

Making a Decision about Social Security Timing

Determining when you (and your spouse) will start taking Social Security benefits may be the most important decision of your retirement. Choosing the right date to claim can save you thousands of dollars in lost benefits.