"When you hit your full retirement age, you'll want to file for your Social Security benefit and suspend its collection," says Laurence Kotlikoff, a professor at Boston University and author of Get What's Yours: The Secrets to Maxing Out Your Social Security. "When you file and suspend, you have the option at any point afterwards to go back if you have an urgent need for money. You can collect all your suspended benefits in one lump sum." Kotlikoff adds that this strategy works best for those who have never married or not intending to marry before age 70.
If you don't file and suspend at full retirement age and decide before age 70 you want to collect your benefits, you will only receive 6 months retirement benefits in arrears. This is less money than if you file and suspended at full retirement age and claimed at a later time, you would be eligible to receive benefits dating back to the time you suspended your claim.
For every year that a person waits after their full retirement age, his or her lifetime payout goes up about 8 percent. So, a 66-year-old who waits to collect at 70 can boost his or her annual payout by 32 percent. A warning: You can't do this if you wait until age 70 to collect without having previously filed and suspended your benefit. If you didn't file and suspend, you're only entitled to six months of retroactive benefits.
So let's assume you are now 63, and you took your benefits early at age 62. At full retirement age, or 66, you can suspend your benefits and restart them at 70. This will generate a larger check down the road.
Even a 68-year old who started receiving checks at full retirement age can file and suspend and take advantage of a larger long-term payout for the rest of his or her life — forgoing receipt of current monthly checks in order to get a bigger check beginning at age 70.
For a single person who has filed and suspended and later needs a large amount of cash prior to age 70, here's how that would work.
Let's say you suspended your benefits at age 68 and your monthly check was $2,000. A year later, at age 69, you had a health emergency and needed money. You could have your benefits reinstated and you would be entitled to receive a full year's worth of payments from Social Security, or a lump sum of $24,000.
Furthermore, if you filed and suspended at age 66 and then requested a lump sum payment from Social Security at age 70, you could collect a nearly six-figure payout. Under this scenario, your $24,000 annual benefit is multiplied by four years' worth of stopped payments for a grand total of $96,000.
The tradeoff for receiving the $96,000 in one big payment is that you lose your delayed retirement credit. In other words, that 8 percent annual boost in your check goes away. So you receive a monthly check that is equal only to your full retirement benefit at age 66, not the enhanced monthly benefit you would have received by delaying receipt of Social Security until age 70.
Still, such a lump sum can be helpful for an unmarried person — especially since he or she doesn't have to worry about potentially decreasing survivor benefits for a spouse or minor child.
Widowed and divorced individuals also can get larger benefit checks by incorporating some claiming strategies.
If you're widowed, you have the option of taking your retirement benefit or your widow benefit. Depending on your earnings and those of your former spouse, you may want to take your survivor benefit at 60 and then take your retirement benefit at full retirement age, or even later, at age 70. Kotlikoff recommends starting the one with the smaller benefit first so the other one can grow. For the lower-earning spouse, it may make better financial sense to take the retirement benefit at 62, then claim the widow benefit at full retirement age.
Finally, those who divorce after 10 or more years of marriage can claim Social Security benefits based on an ex-spouse's earnings. However, if you divorce and remarry, you can't receive spousal benefits based on an ex's work history.
Kotlikoff empahsized that it's not a good idea to collect ex-spousal benefits before your full retirement age if that amount will be lower than your own benefit at full retirement age. Once you do this, your benefit will be the lower amount for the rest of your life.
If you remain divorced, you can collect spousal benefits after reaching full retirement age, provided your ex is over 62 and you were divorced for two or more years (or your former spouse has already filed for retirement benefits). The advantage of taking spousal benefits first is that it allows you to collect some money now while postponing taking your own benefits until age 70, when they max out.