The Social Security Dilemma – When to Start Looking For Ways to Increase Lifetime Benefits?

Social Security offers one of the best forms of retirement income – a tax-favored income source that lasts for the entire lifetime of a beneficiary with inflation protection and survivor benefits.

For most individuals, benefits provide about 30% to 35% of pre-retirement income. In an uncertain world with fewer covered by pensions, 401(k) balances that have dwindled and possibly less earned income because of forced early retirement and layoffs, the option to collect on Social Security as early as possible is an attractive one.

Often individuals will ask when is the optimal time to begin taking benefits. Many apply for benefits as soon as they are eligible at age 62. The average age when people start collecting is just over 63 1/2.

Social Security benefits are based on lifetime earnings. Actual wages are adjusted to account for inflation. And then average monthly earnings during the highest earning quarters over the previous 35 years are used to a basic benefit or “primary insurance amount” referred to as the PIA.

The PIA determines how much you receive at full retirement age – 65 or older depending on an individual’s date of birth. If one chooses to collect benefits before the full retirement age, the monthly benefit is reduced by about 6.7% per year. For someone with a full retirement age of 66 who retires at 62, he or she can expect to receive only 75% of the total benefit. On the other hand, someone who delays receiving benefits accrues credit. So waiting to age 70 can result in monthly payments that are 32% higher or 8% per year for the four year delay in this example.

A number of factors will influence this personal decision. In general, the longer one can hold off on collecting, then the higher the monthly benefit one will be eligible to receive. Since women tend to outlive men, women may benefit most from the higher payments later. So if a single woman can afford to meet lifestyle needs from other sources, then delaying is a reasonable option. For single men or women, family and personal medical history may be the deciding factors.

For those who are married, benefits are based on each spouse’s income record. For spouses who do not have their own income record, the benefit is based on 50% of the working spouse’s. Spousal survivor benefits are equal to the monthly benefit of the higher earning spouse. By delaying, one’s spouse will be eligible for a potentially higher benefit.

Two little-known strategies can actually increase benefits to recipients.

Claim and Suspend:

This option resulted from the Senior Citizens’ Freedom to Work Act of 2000 and provides a recipient an option to change one’s mind. This is ideal for those who are eligible to start collecting but have determined that the full benefit is not needed now.

This strategy offers three ways to add to the personal bottom-line for a worker who has attained Full Retirement Age (FRA): o Sign up for Social Security and allow a spouse to claim a spousal benefit now. o Suspend receipt of benefits by the worker who can now continue to work and accrue delayed retirement credits. By delaying receipt by the worker, the amount this worker will be eligible to collect each month continues to grow 8% per year until age 70. o If a recipient using this strategy dies, the higher accrued benefit passes on to the surviving spouse.

Claim now, Claim more later:

This option works best for married couples who each have their own work record and have reached the respective Full Retirement Age of each recipient.

In this option, a worker can claim a benefit based on 50% of a spouse’s PIA while continuing to work and accrue delayed retirement benefits at 8% per year on the worker’s own record – ideally until age 70. Later the spouse can switch from a spousal benefit to claiming a benefit on their own work record presumably if it is larger.


Deciding to delay benefits really pays when a beneficiary lives long enough to the benefit – either equal to or longer than the actuarial age. For those who are age 65, life expectancy is about 19 years more on average or to age 84 – a little more for women and a little less for men.

For women who survive to an advanced age, a higher earning spouse who holds off on receiving benefits can mean the difference between poverty or not for the surviving spouse.

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