Timing Social Security benefits
Q: I turned 67 in January and my wife will be 62 in October. She doesn’t have Social Security of her own. We both expect to live to 82. My full retirement age is 66. When should she and I start receiving Social Security to maximize benefits? Would the decision change significantly if we live within two to three years of our estimated life expectancies? We aren’t dependent on Social Security income.
A: The age you expect to live to — 82
— is close to the break-even point for someone who waits until age 70 to take Social Security, says Jim Blair, co-owner of Premier Social Security Consulting in Cincinnati. So, the answer for the best age to claim and maximize lifetime benefits could change if you live a few years longer, and it’s possible that you will. Social Security’s life expectancy calculator estimates that, on average, a man your age will live to 84 ½; for your wife it’s close to 87.
Because your wife is younger and likely to outlive you, “she could draw a widow’s benefit, on average, for about eight years,” Blair says. The survivor benefit will be higher for her if you wait until age 70. Plus, if you both file for benefits now, her spousal benefit will be reduced because she is not yet full retirement age.
Although it may make sense to wait until age 70, “it’s hard to give a specific answer,” Blair says. “That’s why we suggest they talk to someone.” Social Security isn’t allowed to give filing advice, but a claiming strategist or financial adviser can run the numbers and show you what the difference in lifetime cumulative benefits is for filing at various ages.
Q: The Consumer Price Index for All Urban Consumers (CPI-U) is used to calculate the income ranges for Medicare surcharges. If the current threshold for higher Part B and D premiums is $88,000 for a single person and the inflation per the CPI-U is 5%, would that threshold increase 5%?
A: Yes, that’s how it works, says Jim Blankenship, founder of Blankenship Financial Planning in New Berlin, Illinois. Each income bracket will increase by the same percentage as the CPI-U, except for the top tier. That will remain at $500,000 for single filers and $750,000 for joint filers until 2028 when it will also be indexed to inflation.
In your example, the threshold for the income-related monthly adjustment amount or Medicare surcharge would become $92,000, up $4,000 for a single filer. (Income levels are rounded to the nearest $1,000.) Still, the threshold might not increase that much. Over the last decade, the CPI-U rose an average of 1.7% each year. In 2021, the index will likely tick up 2.5% to 3%. If so, the 2022 threshold for Medicare surcharges could be as high as $91,000 for single filers ($181,000 for joint filers).