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Maximizing Your Social Security Benefits

Mary Beth Franklin

National Press Foundation Washington, D.C. April 8, 2013


Timing is Everything
Knowing when and how to claim Social Security benefits can boost your retirement income by tens of thousands of dollars over your lifetime.


For Married Couples
The right Social Security claiming strategy can mean the difference of $100,000 or more over your joint lifetimes.

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.

Your Age Matters
• You can collect retirement benefits as early as 62, but they will be reduced by 25% or more for the rest of your life. • If you wait until your normal retirement age, currently 66, you can collect your full retirement benefit even if you continue to work. • Or, if you delay collecting benefits beyond your normal retirement age, you can increase the amount by 8% per year up to age 70.

What’s Your Number?
Birth Year Full Retirement Age Benefit Reduction at 62

1943 – 1954
1955 1956 1957

66 and 2 months 66 and 4 months 66 and 6 months

25.83% 26.67% 27.50%

1959 1960 and later

66 and 8 months
66 and 10 months 67

29.17% 30.00%


Why 66 is the Magic Age
If you wait until 66* to claim Social Security, you can: --Collect full retirement benefits --Exercise some creative claiming strategies --And, avoid losing benefits to earnings cap restrictions.
*If your normal retirement age is higher, so is your magic age.

Earnings Cap Rules
If you collect Social Security benefits before your normal retirement age and continue to work, you will lose $1 in benefits for every $2 you earn over the limit. For 2013, that limit is a mere $15,120.


Lesson #1

If you plan to keep working, in most cases it makes no sense to claim reduced retirement benefits before your normal retirement age.

Collect Social Security benefits early if: • You really need the money and are no longer working or earn less than the earnings cap. • Or, if you’re in poor health and may not live until your normal life expectancy.

Married couples have more flexibility. Sometimes it makes sense for the lower-earning spouse to collect benefits early, assuming she is no longer working or subject to the earnings cap.


Coordinating Benefits
• In most cases, it makes sense for the higher earning spouse to delay benefits as long as possible, up to age 70, to lock in the maximum retirement benefit as well as the largest survivor benefit should he die first. • The lower earning spouse may want to claim reduced benefits early at 62, assuming she or he is no longer working. • But there’s room for a little “magic” in between.

Spousal benefits = 50% of worker’s benefit at 66

Survivor benefits = 100% of worker’s benefit at 66

Magic Strategies to Boost Benefits
• File and Suspend--Triggers benefits for a spouse but allows worker to delay collecting his or her own benefit. • Restrict claim to spousal benefit only—Lets you collect only your spousal benefit while deferring your own retirement. • To exercise these magic strategies, you must wait until 66 or later to first claim benefits.

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.

Lesson #2
Creating the largest possible benefit for the surviving spouse should be the main goal for most married couples.


Survivors Can Switch Benefits
• Widows and widowers can collect survivor benefits as early as age 60, but are subject to benefit reductions and the earnings cap if they continue to work. • They can collect survivor benefits—equal to 100% of the deceased spouse’s benefit initially—and then switch to their own benefit that continues to grow at 8% per year until age 70.

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 exspouse’s work history as early as age 62.


Better strategy for ex-spouses
• Wait until 66 and you can “restrict your claim to spousal benefits only”, collecting half of your ex’s full benefit and delay collecting your own until it is worth the maximum amount at age 70.

Do-over strategy
If you claim benefits early and then change your mind, you have a once-in-a-lifetime chance to suspend your benefits within 12 months of first claiming them, repay what you have received and restart your higher benefits at a later date.

Back-up Plan
If you miss that initial 12-month window, there’s another option. Wait until 66 and you can voluntarily suspend your benefits—but not repay them— and earn 8% per-year in delayed retirement credits up to age 70.

Don’t forget the Kids If you are collecting retirement benefits and you have minor dependent children at home, they are eligible for benefits, too—up to half of your benefit amount.