December 2023

Social Security: Smart strategies to maximize payments

A Q&A with Ben Storey, director of Retirement Research & Insights at Bank of America

As employees plan for retirement, decisions about when to claim Social Security benefits could have an impact on their retirement income. While employees can start collecting benefits as early as age 62, waiting a few years, or until they reach their full retirement age (see “Find your full retirement age” below), can substantially increase the amount they receive over their lifetime.

Workplace Insights™ met with Ben Storey, director of Retirement Research & Insights at Bank of America, to get the latest thinking on what’s important for employees to consider as they approach retirement.

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Workplace Insights™ (WI): Ben, we’re all living longer. Does that change how and when we claim Social Security benefits?

Ben Storey (JBS): Considering that one of the biggest retirement concerns people have is outliving their money, waiting to collect Social Security benefits begins to make a lot more sense than it might have in the past. Waiting to claim benefits can be a way of gaining a measure of protection against the risk of longevity. The longer you wait to begin taking benefits until age 70, the greater the monthly amount you receive.

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WI: How might postponing payments work to an individual’s benefit?

JBS: Well, imagine that at age 67 you’re entitled to an annual Social Security benefit of $10,000. If you wait a year to claim it, you’ll forgo the $10,000 for the first year, but the following year at age 68, you’ll receive an annual benefit of $10,800 or 8% more—an amount, by the way, that is adjusted for inflation, if any, each year for the rest of your life.

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WI: Should women think of Social Security benefits differently?

JBS: Women typically live longer than men, so it’s especially important for them to find ways to boost their retirement income to cover those extra years. Waiting longer to claim Social Security benefits is one strategy. For example, if a single woman waits until she is 70 to claim benefits, instead of 62, she could increase her monthly benefit by 77%, or about $545 each month.¹

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WI: How does being married affect the decision to claim benefits? What’s the rule of thumb for couples?

JBS: It often makes sense for the higher earner—let’s say one’s husband—to wait until 66, or even 70, to claim benefits. Doing so increases his benefits throughout his lifetime and, should he die first, throughout the lifetime of his spouse as well because the survivor benefit would step up to that of the deceased husband. If the earnings gap between the spouse and husband is substantial, the spouse might think about claiming their own reduced benefit at 62 if retired or has limited income, and then request a spousal adjustment once the husband claims Social Security.

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WI: And what are the rules for divorced couples?

JBS: If you don’t remarry and you are 62 years of age or older, you can file for spousal benefits, whether or not your former spouse has filed, as long as you have been divorced for at least two years and you were married to that spouse for at least 10 years. To qualify, your former spouse must be entitled to benefits, and the benefit you would receive on your own work record must be less than what you’d receive based on your former spouse’s record. There’s a Social Security Administration web page that explains these requirements in more detail.

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WI: Can you apply for a spousal benefit if your spouse hasn’t?

JBS: A married person can only apply for a spousal benefit if their spouse is receiving retirement or disability benefits. People can no longer file and then suspend their benefits, allowing them to grow while their spouse collects on their record, as they could before May 2016. And if you were born after January 1, 1954, you can no longer claim twice—or file for spousal benefits at full retirement age while allowing your own retirement benefit to grow.

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WI: What’s your best advice for couples?

JBS: I’d encourage anyone approaching retirement age to speak with their financial, tax and legal advisors. When and how to begin claiming your Social Security benefits are important—and complex—decisions. It can help to talk with those who understand the rules as well as your personal situation.

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WI: Is waiting always the right answer?

JBS: Waiting longer can increase the amount you receive over your lifetime, but what’s right for you may be very different from what’s right for me. You’ve got to consider your health and your family history—how long do people in your family tend to live, for instance? If your parents and grandparents didn’t live past 75, it could make sense to claim your benefits as early as age 62 if you are retired or your income from employment is below the annual earnings limit.

You should also consider your other retirement assets. Claiming your benefits earlier might allow you to delay drawing income from your portfolio and give it more time to grow. Also think about your goals and the kind of lifestyle you want in retirement as well as your immediate financial needs. A family caregiving situation could arise that requires your attention and financial support.

Consult the Social Security website to access a retirement planner and more information. If, after you’ve considered all the factors, you feel that claiming your benefits before age 70 makes sense for you, you shouldn’t feel bad about not waiting. Social Security was conceived as a safety net. And it’s only valuable if you use it when you need it.

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