When you reach your sixties, you’ll encounter many age-related financial and planning milestones. One of the primary concerns is when to file for Social Security benefits. You’ve probably heard that going with the right Social Security claiming strategy will help with maximizing benefits.
For many Americans, Social Security benefits will be a primary retirement income source.
There are hundreds of possibilities on the table when it comes to the timing of when you file. So what’s the best strategy? At what age should you claim? What about spousal benefits, for that matter?
If you’re trying to determine which option is best, here’s some important information to help you get started.
Important Milestones for Social Security Benefits Claiming
You can apply for Social Security benefits at any point from ages 62-70. There are many milestones along the way which can affect the timing of your claim:
Age 59.5 – Retirement Income Penalty Ends
This is the age at which one can withdraw money from traditional IRAs, 401(k)s or similar retirement plans without restrictions. You can also begin taking money out without an added 10% tax penalty. However, account withdrawals will still be taxed at normal tax rates.
For most people, it’s not wise to begin drawing funds from retirement accounts at this relatively young age unless they have specific financial needs. Usually, the value of maintaining tax-preferred individual retirement savings exceeds the benefit that may come from early spending.
Age 60 – Survivor Benefits Become Available
This is the first year you can collect a Social Security survivor benefit if a spouse or ex-spouse has died. Please note, this applies only if they were married for at least 10 years and they never remarried.
Age 62 – First Option to File for Social Security Benefits
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However, certain spousal strategies may be an exception. This is also the age at which pensions from long-term employers may begin.
Age 63.5 – Bridge to Medicare
This isn’t an official milestone, but it can be an important age for laid-off workers who are offered COBRA health care benefits. COBRA benefits typically last for 18 months. 65 is the age at which one can begin Medicare medical coverage.
Therefore, 63-and-a-half is the earliest age at which, if a person was laid off and covered by COBRA health care benefits, that COBRA benefits would provide a healthcare bridge all the way until they are eligible for Medicare.
Age 65 – Medicare Eligibility Age
This is the benchmark for Medicare eligibility age. Most people should sign up for Medicare benefits within a seven-month time period around this birthday. It enables them to avoid lifetime surcharges on Medicare benefits.
There are a few exceptions to this requirement, including active employees who are still covered under an employer health plan.
Age 66 – Social Security Magic Age
For many retirees born 1943-1955, the “magic age” is 66. Because this is the official “full retirement age” (FRA) for many seniors, this milestone enables you to take full advantage of Social Security claiming strategies.
At this age a number of creative Social Security strategies become available. Note, however, that recent changes in tax law have changed claiming strategies open to you. For instance, the popular “File and Suspend” strategy was done away with in May 2016, with certain grandfathering provisions that had to be met by end of April 2016. Consult with a knowledgeable financial professional to help you determine a suitable claiming strategy.
Age 70 – Social Security Income Should Begin
This is the age at which there is no additional benefit to delay filing for Social Security benefits. People who are able to delay filing until the age of 70 have maximized their lifetime monthly Social Security benefit. They should file immediately, as there is no benefit to waiting any longer.
Age 70.5 – Old Milestone for Required Minimum Distributions for Those Born on June 30, 1949 or Earlier
For those born on June 30, 1949 or earlier, required minimum distributions (RMDs) had to be started at age 70.5 prior to the SECURE Act being passed in 2019. RMDs apply to retirement accounts with pre-tax money, such as IRAs, 401(k)s or other similar retirement plans.
Retirees falling within this birth-date range actually have until the following April to make take the first year distribution. After that, each year’s distribution must be taken by Dec. 31 of that year. The total required distribution is based on the total values of all of a person’s IRAs and retirement accounts as of Dec. 31st of the previous year.
Age 72 – Old Milestone for Required Retirement Account Distributions for Those Born on July 1, 1949 Through and Including December 31, 1950
For those born on July 1, 1949, through and including December 31, 1950, RMDs kicked in starting at age 72. This change was made with the passage of the SECURE Act in 2019.
For example, account owners who turned 72 in 2022 have a deadline to take their first RMDs by April 1, 2023. The second RMD must be taken by December 31, 2023 and for each year thereafter for following RMDs.
Age 73 – Required Retirement Account Distributions Begin
If you were born on January 1, 1951, through and including December 31, 1959, the age for starting your RMDs is 73. For those born on January 1, 1960 or later, an adjusted age for starting RMDs at 75 will take effect in 2033, unless the law is changed again.
Important Changes for Social Security Benefits
The Bipartisan Budget Act of 2015 made significant changes to Social Security benefit claiming strategies which retirees may utilize:
File and Suspend Gone – Retirees who reached FRA used to be able to use the “file and suspend” strategy. However, the Bipartisan Budget Act of 2015 contained provisions which closed loopholes allowing for file and suspend. These changes came into effect on May 1, 2016, which ended the availability of this strategy for retirees who hadn’t reached FRA by late April 2016.
There were grandfathering provisions for retirees born on or before January 1, 1954 (people who reached FRA in time). However, they had to file and suspend by April 29, 2016. Outside of this date, people now can still suspend their benefit if desired. However, it would end all spouse and children benefits relating to their worker benefit.
Restricted Applications – The Bipartisan Budget Act of 2015 also impacted the “restricted application,” or the “file as a spouse first” strategy. Under the new law, restricted applications were done away with for anyone born after January 1, 1954. People born after this date can still file a restricted application upon reaching their FRA.
If the other spouse were able to suspend their benefit (having reached FRA themselves), they needed to do so before April 30th of 2016. With the deadline passed, now seniors will have to take an entirely different route for claiming than they originally planned – or now have these paths closed to them. These changes make it imperative to work with a knowledgeable professional to determine a suitable claiming strategy.
Making a Decision about Social Security Timing
Determining when you or your spouse will start taking Social Security benefits may be the most important decision of your retirement. It’s a life event which can mean thousands of dollars lost in collected or missed benefits.
If you need help getting the most out of your Social Security benefits, guidance from a financial professional can help.
Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.