Getting the Most Out of Social Security while Meeting your Needs

For many retirees, Social Security benefits make up a large portion of retirement savings. Often, these people can only follow a limited set of strategies to optimize their benefits because they may not have the financial resources to wait as long as the mathematics of their situation would suggest. This is why our custom reports provide more than just the “optimal strategy.” Rather, we show you the optimal strategy, as well as a wide range of alternative strategies, how to implement them, and how they compare in dollar terms to the optimal strategy. In many cases, one can find a strategy that, while not quite the best from a mathematical standpoint, is far superior to the default (claiming immediately) and better meets financial goals in retirement.

Sometimes, situations even change after a Social Security plan has been partially implemented. In the case of a married couple, sometimes steps can be taken to alter the strategy to get larger SS checks sooner than planned, such as by having one spouse claim earlier than expected. However, beneficiaries and advisors should be aware of the repercussions of changing plans, especially when complex strategies are involved.

Recently, a client wrote to ask the following: “I’m over 66 and still working. Can I apply for my full benefits for a few months to temporarily increase my current income for some bills and then go back to the ‘free spousal’ benefit later on?” In this case, as recommended by our report, the client had filed a restricted application for a “free spousal” benefit on his wife’s record while allowing his own retirement benefit to grow. His financial situation changed, and he was hoping to temporarily increase his benefit by switching to his own benefit and then switching back (by suspending his benefit and going back to the spousal benefit) when he had paid his bills. Unfortunately, this option isn’t available.

When a beneficiary files a restricted application, he can end the restriction by filing for his own benefit at any time. Additionally, a beneficiary can suspend his benefit at any time (as long as he is at or above full retirement age). However, for calculating spousal benefits, a suspended benefit is treated differently than one for which an application was never filed. When my client originally claimed his free spousal benefit, he had never filed for his own benefit, so the spousal benefit is not reduced by the amount of his own benefit. However, if he were to file and then suspend later, he is still “entitled” to his own benefit even after suspending. The spousal benefit he was receiving would be lower, at best, or completely eliminated, at worse, depending on the size of his benefit relative to his wife’s.

Fortunately, our client wrote to ask about his proposed plan. Had he implemented it, he would’ve been stuck with his early claim and may have given up thousands of dollars over his lifetime. His strategy makes intuitive sense, but the way the SSA defines entitlement to benefits is one of the many nuances that claimants need to account for. Our software takes these nuances into account, and if you have questions that our software doesn’t answer, we’re always happy to help our customers.

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