Social Security Q&A: Is Filing Early Best in this Situation?Commentary by Laurence Kotlikoff
August 04, 2014
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.
I’ve been answering questions and writing columns about Social Security each week for the past two years on PBS NEWSHOUR’s website. The editors at Forbes asked me to post a Q&A each day from those columns. To see all my columns, please go to my software company’s site, www.maximizemysocialsecurity.com, and click More Press below the WSJ quote.
Today’s question is about a couple, one of whom is nearing retirement age, with a young child. It shows how the benefits due to a spouse with a child in care have the potential to make claiming early the optimal strategy.
Question: My husband is turning 62 in October and we have a 5-year-old son. My thoughts are that in his case, it does make sense to start collecting Social Security benefits early because our son will be collecting benefits for 13 years versus only five years if we wait until my husband is 70. Please let me know if I am thinking about this the wrong way. Thank you.
Answer: For those who don’t understand your question, Rose, a dependent child can collect Social Security benefits on a parent’s account through age 17 — or through age 19 if she or he is still in elementary or secondary school or if she or he became disabled before age 22, so long as she or he remains disabled.
So in your case, having your husband take his retirement benefit early may be best, in part because you can also receive a spousal benefit as the mother of a dependent child of the retired worker, so long as that child is under age 16 or disabled, although if you earn a lot, the spousal benefit could be wiped out by Social Security’s earnings test. But, if he does take early benefits, he’ll want to consider suspending his own retirement benefit at 66, when he reaches full retirement age and can do so, and then restarting it at 70. This will result in a 32 percent larger real (inflation-adjusted) benefit than if he took it age 66, and suspending won’t affect your spousal benefit or your child’s benefit.
I recommend you use commercially available software that incorporates your past covered earnings histories as well as your future projected covered earnings to determine which strategy will produce the highest lifetime benefits. Your case is very complex and depends on your past and projected earnings, your age, and how long you and your husband may live. If you are very young, say 30, there will be many years when you will likely be collecting survivor benefits. In this case, it may make much more sense for your husband to file and suspend at 66 and wait until 70 to collect his retirement benefit since this retirement benefit, which will be up to 76 percent higher than had he taken it at 62, will be what you will collect as a survivor (assuming he dies after age 70).