by Otis Manning, President,
In the April 2015 issue I wrote an article titled “Preparing for Retirement,” and I mentioned some of the things that are necessary to prepare for Retirement such as:
• Obtaining Medicare
• Medicare Supplement
• Long-Term Care Insurance
• The Value of Using Annuities
• Applying for Social Security
In this article, we will focus on applying for, and how to INCREASE, your Social Security benefits!
Social Security is the ultimate annuity and, if you HAVE NOT applied for Social Security yet, there are various strategies that can be used to INCREASE your benefits.
One strategy is called “File and Suspend.” An example of how to use this strategy is as follows. (We will use a fictitious couple by the name of Fred and Betty.)
• Fred is 64 years old; Betty is 66, her Full Retirement Age.
• Betty files for Social Security and suspends it.
• Fred, when he turns 66, his Full Retirement Age, he applies for the Spousal Benefit.
• When they both turn 70, they take the Maximum Social Security Benefit.
• Based upon Betty’s benefit of $24,000 per year, Fred can get half—which is $12,000 per year from age 66 to 70—in a Spousal Benefit. Times 4 years, this equals $48,000—almost $50,000!
You can file for Social Security as early as age 62. However, for every year you wait, Social Security pays you 8 percent more! Social Security has 2,728 core rules in its Program Operations Manual, and Social Security workers are not supposed to give you “advice” or “information.” Social Security states its workers are not at liberty to substitute their own judgement or opinion on rulings or regulations.
Only 1-2 percent of people claim at age 70; 38-50 percent at age 62. One study concluded that 40 percent who claimed early came to regret their decisions later.
The purpose of this article is to focus on retirement and spousal benefits. However, Social Security also provides benefits for children of retirees, disabled children, divorcees, widow/widower survivors, and divorcee widow/widower survivors. To be eligible, you must have worked 40 quarters and 10 years in total. Those who may receive benefits on your work record include your current spouse, ex-spouse, young children, disabled children, and even your parents. For those of you that are divorced and were married for at least 10 years, you may be able to collect Spousal and Survivor benefits on an ex-spouse’s work record.
You can go to www.socialsecurity.gov and print a copy of your statement.
Starting January 1st of each year, Social Security raises all benefits by the rate of inflation that occurred between the prior two Octobers. This is called a Cost of Living Adjustment, or a COLA.
Delayed retirement credits raise your benefit 8 percent per year through to age 70, if you wait to claim your benefits. Here is another example of how this may look in round numbers:
• You are due $1000 per month at age 66.
• If you claim at age 62, your benefit is reduced to $750 per month.
• If you wait to age 70, it is increased to $1320 per month.
• The difference between $750 and $1320 is 76 percent more! or $570 more per month, or $6840 more per year; over a five-year period this is $34,200 more; over a ten-year period this is $68,400 more; over a 15-year period this is $102,600 more—and this does not even include the cost of living increases!
Suspending your Social Security benefits is only allowed between your Full Retirement Age and age 70; it allows your spouse to collect Spousal Benefits. Voluntary suspension of benefits for people reaching Full Retirement Age has only been permitted since 2000, and it was enabled under the “Senior Citizens’ Freedom to Work Act of 2000.”
You can file the request in writing by sending a letter to the Social Security Administration. Include your Name, Social Security Number, Date of Birth and request that you want to “File and Suspend” your retirement benefits. For more information on this topic go to: http://www.ssa.gov/retire2/suspend.htm
Another strategy is taking a Survivor Benefit now, and your Retirement Benefit at age 70. If your spouse passed away and you have reached your Full Retirement Age—let’s say that is 66—you could apply for just a Survivor Benefit and wait until age 70 to receive your Retirement Benefit, which will be LARGER. In the meantime, you are collecting a Survivor Benefit for four years (between ages 66 and 70) while you are waiting. And your Retirement Benefit is receiving delayed retirement credits, raising your benefit 8 percent per year through to age 70.
The two strategies above assume that you are in a position financially that you can wait to collect a larger benefit later. However, if you are not in this position financially, you may want to take your Retirement Benefits EARLY rather than later.
These situations would include:
• You need the money now!
• A medical condition arises that will dramatically reduce your life expectancy (such as a terminal diagnosis).
• You got laid off, downsized or fired from your job, and financially you cannot wait.
• To enable a young or disabled child to begin collecting a child benefit.
As you can see, there are many factors that can go into when to file for your Social Security benefits.
You only have one opportunity to make the right decision that can INCREASE your benefits. It may be wise to talk with a financial services professional that understands how Social Security fits into your overall retirement planning so you can maximize your benefits!
For additional information on this article you may contact: President Otis Manning, Retirement Solutions, 9212 E. Montgomery Avenue, Suite 401-4, Spokane Valley, WA 99206, email:firstname.lastname@example.org.
Disclaimer: This article is not intended to give legal, tax or investment advice. You must consult your own adviser in order to determine what is best for your specific situation.