Social Security Maximization

With 10,000 baby boomers turning 62 every single day for the next 13 years, Social Security timing strategies have become one of the hottest retirement topics in America.

Plus, it’s no secret that millions of Americans are unprepared for retirement.

The flat stock market during “the lost decade” from 2000-2010, with huge market meltdowns in 2000, 2001, 2002 and 2008 (and record job losses), have destroyed the financial resources of millions of pre-retirees.

All the while, corporations have been discontinuing defined-benefit pensions and placing the responsibility of funding retirement onto their workers.

Throw historically low interest rates into the mix and Social Security benefits now represent the single largest financial asset available to most retirees. And yet, an overwhelming majority of Americans are deciding when to begin collecting their benefits without any kind of useful advice.

In fact, America’s largest banks and financial institutions don’t even train their advisors to provide advice on claiming strategies. And, ironically, Social Security Administration personnel are actually forbidden from discussing claiming strategies!

Kind of sad, considering the fact that a wise claiming strategy can often mean hundreds of thousands of dollars in added benefits over a retiree’s lifetime!

So, it’s no wonder that the question I hear most often is “what’s the best age to take Social Security?”

Key Lesson One: If a single individual lives only to age 80, it doesn’t really matter. I’ve done the math and the cumulative lifetime benefits will be approximately the same whether benefits begin at 62, 63, 64, 65, 66, 67, 68, 69 or 70.

Key Lesson Two: Given a 65 year old couple, there’s 50% chance that one person (usually the wife) will live to be 92. There’s a 25% chance that one (again, most often the wife) will make it to 97.

“Longevity risk” can be minimized by maximizing Social Security benefits, and this can be accomplished by delaying benefits, if possible, until age 70.

No doubt about it, my friends, when it comes to maximizing Social Security benefits, married couples have the most flexibility. While the rules about how and when to claim those benefits are, to say the least, complex, just be aware that in between the extremes of collecting reduced benefits at the earliest age of 62 and receiving the maximum benefits at age 70, there’s room for what I call “Social Security Magic!”

For instance, were you aware that one spouse can claim a spousal benefit early while the other one delays collecting his own benefits until they’re worth a lot more later, thereby maximizing their joint lifetime benefits?

But, in order to take advantage of the more sophisticated strategies such as “filing a restricted claim for spousal benefits only” or “filing and suspending benefits”… at least one spouse must wait until his or her normal retirement age of 66. That’s why I like to call 66 “The Magic Age”.

Here’s an example of how it works… 

(1) At age 66, one spouse (let’s say the husband) files for his benefits and then immediately suspends, triggering spousal benefits for his wife and delaying his own retirement benefits until it grows to the maximum benefit possible at age 70.

(2) The wife, at age 66, files “a restricted claim for spousal benefits only” and delays collecting her own retirement benefits until she reaches age 70. So, the couple ends up collecting one spousal benefit at 66 (which is 50% of the husband’s normal retirement benefit) and they receive two maximum retirement benefits at age 70.

Sheesh. Clear as mud, eh?

Okay, here’s an example of how the numbers might look… 

Let’s assume that Bill and Susan are each entitled to $2,000 per month at their normal retirement age of 66.

(1) When Bill turns 66, he can “file and suspend” his retirement benefits, triggering a $1,000 per month spousal benefit for Susan.

(2) At 66, Susan files a “restricted claim for spousal benefits only,” collecting a $1,000 per month spousal benefit rather than her own $2,000 full retirement benefit.

Susan’s spousal benefit adds up to $48,000 worth of FREE money over a four year period, while she’s allowing her own retirement benefits to increase to their maximum level at age 70! 

You see, because Bill and Susan have BOTH deferred their own retirement benefits, each will continue to accrue delayed Social Security retirement credits worth 8% (simple interest) per year between their normal retirement age of 66 and age 70.

That is a Big Deal, friends, because each of their $2,000 per month retirement checks (at normal retirement age 66) will increase to $2,640 per month by age 70. At that point, Bill and Susan could each begin collecting their maximum enhanced benefits, totally $5,280 monthly.

That’s more than $63,000 per year in guaranteed income for life and…

Key Lesson Three: Their larger base amounts would also translate into larger cost-of-living adjustments in the future!

Dedicated to MAXIMIZING the benefits you’ve earned,