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How to Maximize Social Security Payments: Tips for Singles

September 23, 2015
Navigate the Social Security labyrinth

Navigating the labyrinth of the Social Security system can be confusing and overwhelming. And don't expect any help from the folks at the administration, as they aren't allowed to give you advice on how to maximize Social Security benefits. But there are ways, and it all starts with recognizing qualification differences between married folks and singles.

Here, we’ll look at the special considerations for singles. Depending on whether you are single and never married, divorced, or widowed, there are different options when it comes to collecting Social Security benefits.

Be Patient: Waiting Longer Is Usually Better

One of the cardinal rules relating to Social Security is to be patient, says Laurence J. Kotlikoff, professor of economics at Boston University and co-author of Get What's Yours: The Secrets to Maxing Out Your Social Security.

Simply put, the Social Security administration penalizes you for taking your benefits early and rewards you for taking them late.

"To get maximum coverage against longevity risk—of living far beyond what our savings can support—most of us need to be patient and wait to take our Social Security benefits at their maximum levels,” says Kotlikoff. “In the case of Social Security retirement benefits, that's 70, when our retirement benefit will start at 76% higher than if we take it at 62.”

If your full retirement age is 66, with a monthly benefit of $1,000, if you take benefits early at age 62, it would reduce your benefit to $750. But if you are able to wait until age 70, your benefit would increase to $1,320, according to the Social Security administration. Depending on when you were born, your "full retirement age" or when you qualify for full Social Security benefits could be age 66 or 67. Use this calculator to determine your full retirement age.

Status Matters

Single. The definition of singles for Social Security purposes means either single or divorced but married for less than 10 years. The first tip is to wait as long as you can—up to the age of 70—to file in order to access a greater percentage of your benefit. The second tip is once you hit your full retirement age of 66 or 67, to "file for and suspend your retirement benefits," Kotlikoff suggests. "Ask for your retirement benefits, but then immediately suspend it. That action builds delayed retirement credits. Let's say someone is diagnosed with pancreatic cancer. That action gives them the right to request payment of a lump sum of all the suspended benefits," he says.

Divorced. If you were married for 10 years or longer, you are eligible to take Social Security on both your own and your ex's earnings record. However, if you remarry, you could lose eligibility for ex-spousal benefits. "Divorced couples get the best of both worlds," says Ann Minnium, certified financial planner and founder of Concierge Financial Planning, LLC.

Minnium points to a real-life example: "Lisa was surprised to learn that since she had been married for over 10 years she was eligible to take Social Security based on both her and her ex-husband’s record. Plus, she didn’t have to tell him! Once Len, her ex, reaches age 62, which is next year, Lisa can file for her spousal benefit based on her ex-husband’s record. However, if she waits until her full retirement age of 66 and 2 months, she can have her cake and eat it too. At her full retirement age, Lisa will be able to file for her spousal benefit while still letting her own benefit continue to grow. Yes, that’s correct, she is entitled to two Social Security benefits," Minnium says.

Widowed. If you are widowed, you may be able to time your benefit collection to ensure you receive the highest lifetime value."Take one benefit early and let the other benefit grow and hop onto that," Kotlikoff says. For example, you can begin collecting a reduced widow benefit at age 60, he says. Take that early and wait until 70 to take out your own retirement benefit. "Then you will get the larger of the two," Kotlikoff explains.

Minnium points to another example. "I have a client who has been widowed for many years. She recently retired and started her widow benefit of $23,000 per year at age 64. At age 70 she will switch to her own benefit, which will be $30,000 per year. Assuming she lives to age 95, by filing for her widow benefit and then switching to her own, she will have received over $181,000 more in lifetime Social Security benefits than she would have with her original filing strategy," Minnium says.

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