The Credit Professional Winter 2018 Dec_2018_magazine | Page 5

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Folks with a full retirement age
(FRA) of 66 that begin collecting
benefits at age 62 receive 75
percent of their FRA. Benefits
are reduced by 5/9 of 1 percent
per month for the first 36
months and 5/12 of 1 percent
for each additional month, so a
similar 64-year old that begins
collecting benefits would receive
86.7 percent of their FRA. This
reduction is permanent and is
applied to benefits paid to a
surviving spouse.
An additional disincentive to
early collection comes in the
form of an income-based benefit
reduction. Individuals that have
filed for benefits prior to their
FRA will see a $1 deduction in
Social Security benefits for each
$2 of income in excess of
$16,920 (2017). For those
attaining FRA in 2017, this
total declines to $1 for each $3
earned in excess of $44,880
until the month you reach
your FRA, at which point these
offsets no longer apply.
In contrast, those with an FRA
of 66 that commence benefits at
age 70 receive 132 percent of
their FRA benefit. These folks
receive a delayed retirement
credit of 2/3 of 1 percent per
month, which equates to
8 percent per year. Like the
reduction, this increase is
permanent and is applied to
benefits paid to a surviving
spouse. Social Security cost of
living increases are also based
on this higher amount.
Perhaps the most common
scenario favoring collection at
or before one’s FRA is that of
a married couple where one
spouse has a much smaller
benefit and a longer life
expectancy than their partner.
In this scenario the lower
earning spouse will receive the
amount due their higher
earning spouse when their
spouse eventually dies.
A bit of number crunching is
recommended, and don’t ignore
the role that filing for benefits
Deferring benefits is not right
for everyone, and several factors prior to your FRA has on other
benefits that you may be
including health, wealth and
marital status may impact your eligible for.
decision. For example, a single
Life expectancy clearly plays an
individual in poor health may
not live long enough to reap the important role: the longer lived
will benefit most from deferring
rewards of deferred collection
benefits, while unmarried
and, very importantly, taking
individuals with a short life
their benefits early will not
expectancy may be wise to
affect a surviving spouse.
begin their benefits early.
For those that are extremely
wealthy, where Social Security
It is important, however, to
comprises a mere sliver of
remember that a key benefit
their retirement income, the
of delaying Social Security
claiming age decision may
benefits is to provide higher
seem relatively unimportant.
income during the later years
of retirement. For many, this
may make it possible to live
out their final years in dignity,
rather than in penury.
To Defer or Not to Defer
The Role of
Spousal Benefits
Retirement benefits may be
paid to your spouse, even if
they did not attain the 40
quarters of work required to
qualify for their own retirement
benefits. A spouse can begin
benefits as early as age 62, at
a reduction, or at their full
retirement age. It’s important
to note that spousal benefits
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The Credit Professional
4
December 2018