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April 2013 Tip of the Month

Confessions of a Baby Boomer: Work? How About Making Social Security Work for You?

One week after learning of the death of Richie Havens, the music legend who opened the Woodstock Music and Art Fair in August 1969, Marty Abo met with one bright lady to learn what more of us baby boomers must heed about Social Security. (Marty, too, sang at Woodstock….just not on the stage like Richie. Better he kept to himself).  Introduced to Marty by Paul Tully of Eagle Wealth Advisors, Mary Beth Franklin was previously the senior editor for Kipplingers Personal Finance and now is contributing editor for InvestmentNews.  If you want the real low down, you really should follow the sage comments on social security and related issues from InvestmentNews’ retirement guru, Mary Beth or even contact her directly at Here are the salient points Marty learned from his new friend Mary Beth (if I were you, I’d print and save this…and remember where you put it):

  • Timing is everything.  Knowing when and how to claim Social Security benefits can boost retirement income by tens of thousands of dollars over an individual’s lifetime.
  • For married couples the right Social Security claiming strategy can mean the difference of $100,000 or more over their joint lifetimes.
  • The Basics?  If your normal retirement age is 66, you can begin collecting benefits as early as 62, but your retirement benefits will be reduced by 25% for the rest of your life.  However, collecting early might not affect your survivor benefits.
  • Benefit payouts differ
    • Spousal benefits = 50% of worker’s benefit if collected at 66; less if claimed earlier.
    • Survivor benefits = 100% of worker’s benefit if collected at 66; less if claimed earlier.
  • 66 is the “Magic” Age.  If you wait until 66 to claim benefits, you can:
    • Collect your full retirement benefit,
    • Exercise some creative claiming strategies, and
    • Avoid losing benefits due to earnings cap restrictions.
  • The Earnings Cap. If you collect Social Security benefits before age 66 and continue to work, you lose $1 in benefits for every $2 earned over the limit.  For 2013, that limit is a mere $15,120. 
  • Important Lesson #1. If you plan to keep working, in most cases, it makes no sense to claim reduced retirement benefits early at age 62.
  • There are, of course, exceptions.  Collect Social Security benefits early if:
    1. You really need the money and are no longer working or earn less than the earnings cap, or
    2. If you’re in poor health and may not live until your normal life expectancy
  • For Singles. Your choice when to begin Social Security benefits depends on your health, finances and whether you plan to continue working.  But if you are divorced or widowed, you may have additional claiming options.
  • Married couples have more options and sometimes it makes more sense for one spouse to collect benefits early.
  • Strategy for Traditional Couples. If one spouse (assume the husband) has little or no work history, the main breadwinner can “file and suspend” at 66, triggering his wife’s spousal benefit while deferring his own retirement benefits until they are worth later.
  • Strategy for Dual Income Couples. One spouse files for benefits early and the other waits until 66 to file a restricted claim for spousal benefits only. He or she collects a smaller benefit now –  and a bigger benefit later.
  • Combo Strategy. Power couples where each has earned substantial retirement benefits can do both:
    • One can file and suspend, triggering benefits for the other;
    • The other spouse files a restricted claim for spousal benefits only.
    • They both defer claiming their own benefits until they are worth the maximum amount.
  • Bonus For Waiting. You earn 8% for every year you delay claiming Social Security retirement benefits beyond your normal retirement age up to age 70.
  • Who Collects Delayed Retirement Credits? The 8% per year increase in benefits between ages 66 and 70 applies only to the worker’s retirement benefit.  It does not apply to a spousal benefit.  But if he dies first, her survivor benefits are equal to 100% of what he received during his life – including delayed retirement credits.
  • Important Lesson #2. Creating the largest possible benefit for the surviving spouse should be the main goal for most married couples.
  • Collect on Your Ex.  As long as you were married at least 10 years and are not currently married, you may be able to collect on your ex-spouse’s work history as early as age 62.
  • Do-over strategy. If you change your mind within 12 months of first claiming retirement benefits, you can repay the money you have already received and restart your benefits at a higher rate later.  Or, if you can voluntarily suspend your benefits – but not repay them – and earn 8% per year in delayed retirement credits up to age 70. If you wait until your full retirement age of 66 you can voluntarily suspend your benefits (you can't suspend before that outside of the 12-month window).