Waiting longer to file for your retirement benefits doesn’t always pay off.

There’s a reason seniors are often urged to delay taking Social Security until they turn 70. You’ll be entitled to what the government considers your “full” monthly benefit based on your earnings history at your full retirement age (FRA), which for anyone not yet retired is either 66, 67, or somewhere in between, depending on your year of birth. But for each month beyond your FRA that you postpone claiming Social Security, you get a delayed retirement credit that gives your eventual monthly benefits a permanent boost.

Once you turn 70, you hit the ceiling when it comes to those delayed retirement credits. Waiting no longer increases your benefit check size. That’s why 70 is generally considered the latest age to file. And if you think you’ll live a reasonably long life, you could eventually receive enough of those larger monthly checks that you come out ahead financially from having claimed benefits at 70 rather than earlier.

But while that makes sense for a lot of people, there’s one scenario where it expressly does not pay. And if you delay filing in that situation, you could lose out on money for no good reason.

Spousal benefits can’t grow
Most people claim Social Security based on their own earnings histories. If you’re going that route, you can accrue delayed retirement credits for postponing the day when you file for Social Security. But if you’re claiming a spousal benefit, the rules are different.

Some people don’t earn enough work credits in their lifetime to qualify for Social Security themselves. But if you’re married to someone who’s eligible for Social Security, you can claim a spousal benefit based on their earnings record once they file for benefits themselves. You can also claim spousal benefits based on a former spouse’s record, provided you were married to that person for 10 years or longer.

Spousal benefits are worth 50% of what your current or former spouse collects, provided you wait until your own FRA to sign up for them. But one thing you don’t want to do if you’re claiming spousal benefits is delay beyond that point.

The reason? You can only boost your monthly benefit this way when you’re claiming it against your own earnings record. You can’t do that with spousal benefits.

So, let’s say your spouse collects $2,000 a month in Social Security, and you sign up for a spousal benefit at your own FRA of 67. You’ll get checks of $1,000 a month. Waiting to claim until you turn 70 won’t boost those payments, so if you delay your filing, all you’ll do miss out on years of receiving money you were otherwise entitled to.

Know the rules
Deciding when to claim Social Security can be tough in many cases. But when you’re talking about spousal benefits, it’s not as hard because your timing doesn’t make as much of a difference.

Whether you’re filing for a spousal benefit or not, though, it’s important to know the rules of claiming your retirement benefits. Reading up on Social Security could help you find the ways to take the fullest advantage of the program that you can, so spend some time learning more about its ins and outs long before you have to make your decisions.

— Maurie Backman

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Source: The Motley Fool