Social Security

Taking Social Security Early or Late? Social Security Timing™ evaluates all 81 elections age combinations across 9 different election strategies and finds the highest lifetime benefit.
Most people are eligible to elect Social Security at any time between age 62 and 70. However, most people simply elect Social Security at whatever age they decide to retire, not the age when it will give them the maximum lifetime benefit.
How much you receive from Social Security depends on three primary factors: Your earnings record When you elect How long you expect to live Since you can't go back and change your earnings record, and you have minimal control over how long you live, calculating an expected lifetime benefit largely hinges on when you elect. In theory, if you elect early, you will get a smaller benefit for a longer period of time. If you elect later, you will get a larger benefit for a shorter period of time. For single people, the decision of whether to elect early or later is usually as simple as answering the question: do you think you'll live long enough to make waiting worth it?
For example, if you decide to elect at 66, how long will it take for the larger payments to make up for the payments you missed from 62-65. Single people can use a simple “break-even” calculator to determine how long they would have to live to make waiting worthwhile.
For married couples, however, the decision is much more complex. Why? Because Social Security offers three distinct benefits for married people that these simple calculators ignore: Retired Worker Benefit: Based on your own earnings record Spousal Benefit: Provides your spouse with a benefit once you claim your own benefit Survivor Benefit: Provides your spouse with a benefit after your death Virtually all of the simple break-even calculators in use today ignore the Spousal and Survivor benefits. More complex planning software includes spousal and survivor benefits but only for one combination of election ages. In short, neither tool offers a thorough analysis. Social Security Timing™ evaluates all 81 election age combinations across 9 different election strategies and finds the highest lifetime benefit. Unusual Strategies for Social Security Timing™ If you file prior to full retirement age, you are deemed to have filed for all benefits for which you are eligible. At full retirement age and beyond, you have several options to elect a limited benefit for a period of time, then switch to a larger benefit at some point in the future.
We refer to these planning options as “Switch Strategies.” A recent study suggested that these strategies represent over $10 Billion in unclaimed Social Security benefits. For an individual family, it is not uncommon to receive an additional $20,000 to $40,000 or more in benefits. There are two basic techniques that enable switch strategies: the “restricted application” and the “file and suspend.” When you go to the Social Security office, the individual you meet with may have been trained to help you identify the highest benefit you can get today, not necessarily over your lifetime, and likely not over the joint lives of you and your spouse.
As a result, you are unlikely to hear about these techniques during a typical visit. Restricted Applications Once you reach Normal Retirement Age, you have the option to restrict your application to exclude certain benefits. If a benefit is excluded, it will continue to build delayed retirement credits.
As an example, a higher-earning spouse, who may want to wait until age 70 to collect his own benefit may be able to file at 66 for only the benefit available under his spouse's work record, while still allowing his own benefit to build delayed retirement credits. At age 70, he would switch to his own benefit. Alternatively, a lower-earning spouse could restrict his or her application to only spousal benefits while continuing to claim delayed credits on his or her own earnings record. File and Suspend
The second technique is the ability to file and suspend. Spousal benefits are not available until the primary earner has filed for his or her own benefits. The Senior Citizens� Freedom to Work Act of 2000 allows a worker to earn delayed retirement credits after filing for benefits if he requests that he not receive benefits during a given period. As a result, a higher-earning spouse can file for benefits, then immediately suspend the benefit, and continue to earn delayed credits. In the process, he will have made his spouse eligible for spousal benefits under his earnings record.
There are many possible combinations It is important to note that Social Security benefits are completely gender-neutral. In other words, any technique that is available to the “primary earner” is also available to the “secondary earner.” Certain combinations of the two techniques are also allowed.
For example, the higher earner could file and suspend to make a spousal benefit available to the secondary earner, who could then file a restricted application for only spousal benefits. This would allow both earners to earn delayed retirement credits on their own earnings records while one spouse still collects benefits now.
Why Maximize Social Security? We've been brainwashed into thinking Social Security isn't going to be there for the long term, so many couples ignore it when it comes to their retirement planning. Their attitude is "Don't count on it because it may not be there." It's time to set the record straight. For most middle income couples, Social Security in fact makes up 20% – 50% of their retirement income—often upwards of $500,000 in lifetime benefits. Obviously, that is a large sum of money for just about anyone. Doesn't it make sense to maximize that asset if you can? Also, we don't hear enough how unique Social Security really is as a retirement asset.
For most married couples, Social Security is the only retirement asset that: Is adjusted annually for inflation Is tax-advantaged—at worst, it's only 85% taxable as normal income Will continue to pay as long as you live Is backed by a government promise With so much at stake, when and how to elect Social Security may be the most important decision middle income couples make in retirement.