Claiming Your Social Security Benefits

NOTE: The following article is provided by Victor Boltniew, MBA, CRPC, IAR. For over 28 years, Victor has helped retirees in the Cleveland, TN area determine when they should start receiving their Social Security benefits. Victor has provided this article as a service to the participants in the Ministers’ Retirement Plan, managed by the Church of God Benefits Board, Inc.

For your long-term financial welfare, it is critically important when you choose to start collecting Social Security retirement benefits. For a majority of retirees, Social Security benefits provide most of their retirement income. According to the National Institute for Retirement Security, 40.2% of retirees live only on Social Security, while a recent Gallup survey showed that for 57% of retirees, a majority of their income comes from Social Security. Even if you have contributed to the Ministers’ Retirement Plan a good portion of your ministry, Social Security could still make up between 40 to 60 % of your retirement income. Therefore, when you elect to start collecting Social Security benefits is an important financial decision. 

The question is always asked, should I collect Social Security as early as possible so I don’t miss out on any benefits if I die early? For retirees born after 1954, a person that starts drawing benefits when they turn 62 will draw less than 56% of what they would if they waited to start Social Security benefits at age 70. The percentage is slightly higher for those born prior to 1954. For couples in which one spouse will live to age 90 and will file on their spouses’ work record, taking Social Security at age 62 could mean between $100,000 and $200,000 less in lifetime benefits (based on a 62-year-old drawing a $1,000 per month). The estimated loss does not include cost of living adjustments on the higher amounts. For example, in 2023 it might be the difference between having an 8.7% cost of living adjustment on $12,000 a year versus $21,120 a year.

I am repeatedly asked to do a break-even analysis on whether a person should draw earlier or wait until they are 70 years of age. Some people are concerned about what Social Security benefits they may lose out on if they get their eternal reward early. If you are single, you may want to consider drawing early! The issue isn’t if you die early and collect your eternal inheritance. It is whether you tarry and stay as an ambassador longer than you or your spouse expected. Usually, if there is one spouse that is going to draw a substantially higher amount and one is expected to live beyond 82, the higher earner should delay drawing Social Security benefits as long as possible, but not past the age of 70. Software is available to show you options and can help you determine when the lower earner should begin drawing.

One mistake often made is filing for benefits prior to full retirement age, continuing to work or going back to work without informing the Social Security Administration, and exceeding the earnings limit. If this occurs, the Social Security Administration will send an overpayment notice, wanting excess benefits repaid because the worker exceeded the annual earnings limit. If you take Social Security benefits prior to your full retirement age, you are required to pay back $1 for every $2 of earnings over the earnings limit. Once you reach full retirement age, you can make as much as you desire and draw your full Social Security benefits, without limitations.

There is also a misconception that a spouse can file for benefits on your Social Security work record prior to you filing for benefits. In reality, the worker must file before anyone can file a claim on their record (spouse or a dependent child). The only exception to this rule is an ex-spouse who is at least 62 and who was married to the worker for 10 years, is currently unmarried, and who has been divorced from the worker for at least 2 years before filing the claim for benefits.

In this limited space, I have only been able to address some of the bigger issues that arise concerning claiming Social Security benefits. If you have more questions concerning your specific situation, you may email me at Victor@retirewithvictor.com. (Please note that a fee may be charged for detailed analysis.)

I am at your service and would love to help you with your Social Security questions.  

Victor Boltniew, MBA, CRPC, IAR