As they approach retirement, couples in New York, NY often face the important decision of when to begin collecting Social Security benefits. This dilemma is something that Jane and John, a hypothetical couple, are currently grappling with.
Jane, aged 58, and her husband John, aged 64, have worked diligently throughout their lives and are eagerly anticipating a well-deserved retirement. However, their retirement plans are intertwined with the question of when to start receiving their Social Security benefits.
John chose to start collecting his Social Security benefits at age 62, a decision that many individuals contemplate. Now, at 64, he is contemplating the implications of his early retirement on their financial future.
On the other hand, Jane is weighing her options. Should she begin receiving her own Social Security benefits immediately, or would it be more advantageous to wait until her full retirement age (FRA) of 67? Jane is also considering the possibility of collecting spousal benefits from John now and switching to her own benefits later.
To address Jane and John’s situation, it is crucial to understand the rules governing Social Security benefits. The process of file and suspend, which allowed one spouse to collect spousal benefits and switch to their own benefits later, has been eliminated since the enactment of The Bipartisan Budget Act of 2015.
Furthermore, if individuals are eligible for both personal and spousal benefits, they must apply for both simultaneously, a process referred to as deemed filing. This means that if Jane decides to apply for either spousal or personal benefits, she will automatically apply for both, and the Social Security Administration (SSA) will provide a combination of these benefits, capped at the higher of the two amounts.
For spousal benefits, Jane can receive up to 50% of John’s primary insurance amount (PIA), which represents the full benefit he is entitled to at his FRA. The timing of John’s retirement does not affect the spousal benefit amount, but Jane’s benefit amount will be permanently reduced if she starts collecting benefits before reaching her FRA.
In scenarios where individuals are eligible for both personal and spousal benefits, the SSA will pay out the higher of the two amounts. Therefore, Jane must carefully evaluate her overall financial situation, including other sources of income and assets, as she devises her Social Security strategy.
Navigating the complexities of Social Security planning, especially concerning spousal benefits and the timing of benefit collection, can be challenging. For individuals in a situation similar to Jane and John, seeking guidance from a financial adviser is advisable. A financial adviser can offer tailored insights based on individual financial goals and circumstances, providing a more comprehensive understanding of Social Security planning strategies.
In conclusion, the decision of when to begin collecting Social Security benefits is a significant one for couples nearing retirement. By understanding the rules, exploring the numbers, and consulting a financial adviser, individuals like Jane and John can make well-informed choices that align with their financial goals and circumstances.