Many Americans count on Social Security as a major source of their retirement income, yet they are unclear on how the benefit works or are unaware of all the benefits available.
Benefits to Use for Assisted Living Costs
Assisted living and healthcare costs are the most expensive costs of retirement. Social Security benefits are a major source of income to help retirees with these costs, but far too many seniors have no clear idea of how these benefits work.
In fact, according to recent data from NHP Foundation, 62% of baby boomers are expecting too much from Social Security and over one-third have no retirement budget.
Not only that, but many seniors have major misconceptions about Social Security benefits and don’t know how to maximize many of the benefits available to them.
Here is a list of some little-known Social Security benefits that will help you maximize your retirement payout:
1. Claiming benefits at optimal times.
There are many ways to collect Social Security benefits, so you need to figure out the right formula for you and your financial needs. It’s ideal to wait until you’ve reached full retirement age to start collecting Social Security because the monthly benefit is so much higher. For example, if you were born in 1955, your full retirement age is 66 years and 2 months. That would be the age at which you can collect 100% of your benefit.
Many Americans, especially women, miss out on the full payout because decide to quit working earlier than expected for a multitude of reasons, whether it’s their caregiving responsibilities or they are just unaware of the magnitude of increased benefits if they work longer. Keep in mind that if you start collecting at 62, you will collect only 74.2% of the monthly benefit. If you delay your benefit until age 65, you will get 92.2% of the benefit.
Likewise, if you receive Social Security benefits as a spouse, the longer you wait, the bigger the benefit, provided your wage-earner husband or wife waited until full retirement age to start collecting.
2. Spousal Social Security benefit.
The Social Security spousal benefit is one such retirement resource that people don’t know how to navigate as there are many details and variables. If you only plan on claiming your own Social Security benefits under your own work record, you might be missing out on a higher payment if you’re eligible for widow or spousal Social Security benefits.
Here are a few things to consider:
- If you’re the higher earner, consider your spouse. If you die, your spouse could opt to earn either the widow’s benefits or their own benefits, depending on which is higher. If you’ve claimed your benefits early instead of waiting to earn delayed retirement credits, you’ve reduced the widow’s benefits for your surviving spouse.
- If your spouse earned more, carefully consider whether claiming under his or her work record could provide you with more money than claiming your own work history.
- You can still claim spousal benefits after divorce as long as you were married for at least ten years.
3. The longevity bet.
If people in your family are in bad health, drawing Social Security benefits at the first opportunity may make the most sense to get the most from the benefit. It all depends on your unique investment time horizon and life expectancy.
Doug Carey, Founder and President of the financial planning software firm, WealthTrace, says Social Security “doesn’t see itself as an oddsmaker, but it does require you to bet on your longevity.”
For example, the break-even point for someone who earned the inflation-adjusted equivalent of $70,000 per year for 35 years is about age 80. If this person waits until 70 to claim Social Security and lives until at least age 90, he’ll accumulate almost $162,000 more in benefits than he would if he had claimed at 62. However, there’s a possibility of losing the bet and getting nothing.
4. The SSDI application.
Allsup, a private firm that advises people about how to get SSDI, says Social Security doesn’t make it clear that an applicant can have representation from the very beginning of the application process. In fact, two-thirds of SSDI applicants who file on their own are denied, and more than 50% of applicants who try to get through the process on their own fail, which is why expert advisement is so important.
Many Americans are completely unaware of this benefit, and you can apply at any age. So, if you have a loved one in assisted living, find out whether they might be eligible to help with their retirement funding needs.
5. Widows and widowers benefit.
There are some loop-holes in the widows and widowers benefit that you or a loved one may not know about. A widow or widower can start collecting Social Security benefits based on their own earnings record, then switch later to survivors benefits. They can begin with survivors benefits and later switch to benefits based on their own earnings record; even if they are filing before full retirement age. Spousal benefits are not quite as lenient.
For example, a widow can begin drawing survivors benefits on her late husband’s Social Security when she is as young as 60, but only at a reduced rate. Then she can choose to leave her own Social Security alone, allowing it to grow in value until her full retirement age, or even age 70. This works for widowers, too.
It may seem intimidating, but it’s important to prepare for your financial future. If you have a loved one in assisted living and are not confident about covering the costs, there may be available Social Security benefits you’ve all overlooked.
Consider sitting down with an expert financial advisor to strategize the best way to utilize these types of benefits so that everyone has financial peace of mind.
Were you aware of all the Social Security benefits available to you, your parent, senior loved one or spouse? We’d like to hear more about your experiences in the comments below.