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Social Security tips for singles

Not married? Here are some strategies to help you maximize your Social Security benefits.

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Figuring out when and how to take Social Security can be a complicated decision, and there are no one-size-fits-all answers. What’s more, much of the advice about Social Security assumes you are married—and married couples often have something of an advantage, because there are strategies that play off each spouse’s ability to claim or delay benefits.

But what if you’re on your own? Perhaps you’re widowed, or divorced, or simply never married. If so, consider this: More than 20% of men and nearly 40% of women age 65 to 74 are single,1 and those figures rise sharply as people age. If you’re in that camp, here are some strategies to consider to help make the most of your Social Security benefits.

The value of waiting

First, some basics: You can start taking Social Security, receiving reduced benefits, when you reach age 62, rather than waiting until your full retirement age (FRA). FRA ranges from 65 to 67, depending on when you were born. (See your full retirement age.)

If you take benefits before you reach FRA, Social Security will reduce your payments. If you delay collecting until after you reach FRA, the amount of your monthly benefit will increase until you reach age 70. Imagine, for example, a woman whose full retirement age is 66, and who is eligible to get $1,500 a month at age 62. If she waits until FRA to collect, she will receive 33% more, or $2,000 a month. And if she waits until 70, her benefits will increase another 32%, to $2,640 a month.2 (Note: All figures are in today's dollars and before tax; the actual benefit would be adjusted for inflation and would possibly be subject to income tax.)

Generally, the longer you delay taking Social Security, the higher your lifetime total of benefits may be, and the gains from waiting can often be significant. In the above example, the woman’s lifetime benefits would be about $47,000 greater if she waited until age 70 to collect benefits and then lived to age 89.

That’s a big difference, and millions of Americans could help ensure a brighter financial future for themselves simply by hitting the pause button on Social Security for a few years. Of course, if you wait to collect, you may not live long enough to enjoy the added value of increased payments. Because none of knows when we will die, you need to make some reasonable assumptions about your lifespan, based on your health and family history. To help you estimate when you may break even, the Social Security Administration provides a Retirement Estimator.

Find your own strategy

Your goal shouldn’t simply be to maximize your Social Security benefits in isolation; you should strive to maximize your total retirement income. Social Security isn’t just a check that arrives once a month; it’s an income-producing, inflation-protected component of your overall portfolio. Delaying your benefits will boost your monthly payments and, potentially, your total income stream later on. But if you wait to age 70, you may have one less way to replace your former income as you start retirement. And that means you need to carefully align your other sources of cash, such as pensions, annuities, and investment portfolio, with your expenses. If you don't, delaying Social Security could leave you withdrawing from your other assets more quickly than you should—an especially acute problem during times of poor market performance.

The higher your expenses, the sooner you may need Social Security as replacement income. But you need to chart your income and expenses across various scenarios to determine when it’s best to bring Social Security onto your personal ledger.

If you are divorced

There are a few things to keep in mind if you have been married in the past, but aren’t today. If you are divorced or getting divorced, one key factor to keep in mind is the “10-year rule.” You are eligible to collect spousal benefits from Social Security based on your ex-spouse’s earnings history if you were married for at least 10 years and are unmarried today. These payments are equal to 50% of your spouse’s benefits if you start collecting at full retirement age — less if you take Social Security early. So just because you’re no longer married to a former spouse doesn’t mean his or her work record stops giving your retirement a boost.

Your benefits won’t have any impact on your former spouse; the fact that you collect Social Security will not affect payments to your ex, or to any new family he or she may have started. To familiarize yourself with all the rules, you can start here.

If you are widowed

If you are a widow or widower, you are eligible to collect your former spouse’s Social Security payments as a survivor benefit. Again, if you wait until FRA to take them, you can receive 100% of that benefit, less if you collect early. (The rules about how much less are different for survivor benefits than for regular Social Security; get the details) You can also take whichever payment is larger: a monthly check based on your own work history, or the survivor’s benefit.

But you don’t have to make one permanent choice. There are two strategies worth considering. First, you can claim a survivor’s benefit now, let the amount of your own payments grow, and then switch to claiming your benefits later. This may work best if you’re under age 70 (because your own payments will only increase until you’re 70) and have a relatively high benefit at FRA compared with that of your deceased spouse.

For example, consider a 62-year-old woman who is eligible to get $1,500 in benefits at her FRA of 66. Her husband started taking benefits at 62, was collecting monthly checks of $1,500, and died this year at 66. She could claim a survivor’s benefit of $1,215 now, because that would be greater than the $1,125 that Social Security would pay her based on her own earnings, and keep taking it. But she might be better off starting with a survivor’s benefit, then switching to her own payments at age 70, because by then, the latter will have increased to $1,980 a month. This would earn her more than $115,000 in extra payments if she lived to age 88, boosting her lifetime benefits by about 40%.3 These rules are complex, however, and you should consider speaking with a Social Security representative.

Second, you can claim your own benefit now, then switch to a survivor’s benefit later. Many retirees are surprised to learn that survivor benefits can increase after a spouse dies, but they do—until you reach FRA. This strategy may work best if you’re younger than full retirement age and you will have a low monthly benefit at FRA compared with that of your deceased spouse.

For example, imagine another 62-year-old woman who is eligible for $750 a month from Social Security at FRA. Her husband started taking benefits at 62, was getting $1,500 a month, and died this year at age 66. As in the first example, she could take a survivor benefit of $1,215 a month. That’s significantly more than the $563 a month in payments her own earnings record would generate now. But if she is able to accept these lower benefits for the first four years of her retirement, by the time she hits FRA, her survivor benefit will rise to $1,500 a month. Switch to that higher amount, and she will increase her lifetime benefits by $25,000, or almost 9%, if she lives until 88. 2

Finally, you can claim survivor benefits if your ex-spouse dies, as long as your marriage lasted 10 years or longer. These rules are complex, however, especially if there’s any possibility that you could marry again. So it’s always wise to consult the Social Security Administration (800-772-1213).

So, take a few minutes and project your future benefits, based on various scenarios. Doing so may help you maximize your Social Security benefits, which could contribute to your financial well-being in retirement.

Next steps

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1. Source: Older Americans 2012, Key Indicators of Well Being, The Federal Interagency Forum on Aging‐Related Statistics, August 2012.
2. The hypothetical examples were calculated by Strategic Advisers, Inc., based on Social Security payout tables, as of April 2010. Strategic Advisers Inc., is a registered investment adviser and a Fidelity Investments company.
3. Lifetime benefits are determined by calculating the present values of the Social Security payments over time. The present values are calculated by discounting the Social Security payouts by an inflation-adjusted rate of return. The illustrations use the historical average yield of U.S. 10-Year TIPS for discounting.
The benefit calculations and discounting in this article does not account for the effect of taxes. The after-tax discount rate for an individual could be very different from another depending on multiple factors including the sources and levels of income. For individualized estimates, one could try the Retirement Estimator from the Social Security Administration.
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