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We’ll go over the primary options for a single person below.
Delaying
In order to increase your Social Security benefit amount, you can always delay your filing. If your Full Retirement Age is 66 for example, delaying filing from age 62 to age 63 will result in an increase of your benefits of 5%. Delaying from age 63 to 64 will net an increase of 6 2/3%, as will delaying each year beyond age 63 up to your Full Retirement Age.
Delaying beyond Full Retirement Age provides increase to your benefits as well. For each year that you delay after Full Retirement Age your benefit will increase by 8%. If your Full Retirement Age is 66, that could be a total of 32% increase over your Full Retirement Age benefit by delaying to age 70.
Continuing Work
When you reach age 62 you have the option of beginning to receive your Social Security benefit. At that age, the benefit will be reduced, by as much as 30% if your Full Retirement Age is 67 (25% if FRA is age 66). However, if you’re still working, you may be in a position to increase your projected Social Security benefit if your current earnings are greater than the indexed earnings from the years earlier in your career. When later earnings are greater than your earlier earnings (indexed) these greater earnings replace the lower earnings, thereby increasing the average lifetime indexed earnings that is used to calculate your benefit.
So – if in an earlier year your earnings were indexed as $20,000 per year and you’re now (at age 62) earning $25,000 per year, your current year’s earnings will replace the lower earnings from earlier, increasing your average lifetime earnings. When your benefit is re-calculated, there will be an increase to the projected benefit due to the increased lifetime earnings.
In addition, if you’re still working it may not make sense to file for your Social Security benefit since there is a limit to the amount of money you can earn while receiving benefits if you’re under your Full Retirement Age (FRA). In 2015 the earnings limit is $15,720 per year before the year you reach Full Retirement Age. Above that limit, $1 is withheld for every $2 you’ve earned above the annual limit. So if your earnings are significant, you’ll be giving back most of your benefit anyhow.
File & Suspend
Usually when we discuss the concept of File & Suspend we’re talking about married (or previously married) folks. File & Suspend can be beneficial as a Social Security filing strategy for single folks as well, in a couple of cases.
File & Suspend, briefly, is the situation where the individual files for Social Security benefits and then immediately suspends receipt of those benefits, delaying filing until some later age.
First of all, the act of File & Suspend provides the single person with an option to change his or her mind later and receive Social Security benefits retroactively to the date that the original File & Suspend was enacted. Then he or she would continue receiving benefits from that point on as if the filing date was never suspended. This can be useful in the case where the individual intended to delay filing to age 70 (for example) but circumstances have changed and now he or she would like to receive the benefits earlier. Note: this retroactive benefit option has been eliminated as of April 29, 2016. It is no longer possible to suspend benefits and change your mind for retroactive benefits.
For example, Tom, who has never been married, has a benefit available to him at his FRA of $2,000 per month. He decides to File & Suspend his benefit at age 66 (his Full Retirement Age), intending to delay the benefits to his age 70. At that point his benefit would have grown to $2,640 per month.
Unfortunately Tom falls upon hard times during his 68th year. He really could use some extra money right now, as he has high blood pressure and is no longer eligible for his truck driver’s license, so he’s unable to work.
Tom could file for his Social Security benefits now at age 68, and he’d receive a benefit of approximately $2,320 per month (plus Cost-Of-Living Adjustments). On the other hand though, since Tom did a File & Suspend at age 66, he could retroactively receive two years’ worth of benefits, for a total of $48,000 in a lump sum. Then he would continue to receive a monthly benefit of $2,000 (plus COLAs) from this point forward.
Dependent’s Benefits
The other reason that a single person might File & Suspend is to provide benefits for a dependent while still delaying receipt of his own benefits to some later age. This is exactly the same as the reason a married person might File & Suspend his or her benefits, but there’s no spousal benefits involved.
So Tom from our example above has two young children ages 2 and 7 with his live-in girlfriend Ruth. Tom provides more than 50% of the support for the kids. When he files for his Social Security benefit, the children are eligible for dependent’s benefits based upon his Social Security record. By enacting a File & Suspend, Tom can continue to delay his own Social Security benefit while at the same time providing dependent’s benefits for the children.