Social Security Nonsense Watch: Beware the Uninformed Expert

Statistics show that delaying Social Security benefits, as opposed to claiming immediately at 62, is becoming more popular. People realize the impact that a well thought out strategy can have on their bottom line, and they seek guidance from experts on how to implement such a strategy. More and more, people have stepped in to try to fill this information vacuum – some more qualified than others. Simply put, Social Security is a complex program. It is perfectly reasonable to expect that an expert on personal finance in general may not have a good understanding of Social Security, which is the main reason why we were able to step in and provide custom analysis to individuals and couples looking to maximize their Social Security benefits.

Recently, the BAM Advisor Network released an article titled ‘Strategies for Optimizing Social Security Benefits.’ The author did a decent job of presenting the basics, but made some key errors on the more complex issues surrounding the Social Security system. First, when discussing spousal benefits, she said:

Consider the case of a couple in which one spouse has not earned enough to qualify for Social Security independently. Under current laws, that spouse may be able to claim 35 to 50 percent of the other spouse’s full benefit when he reaches 62.

Unfortunately, the author left out the important condition that the main beneficiary must file (or file and suspend) for benefits before his spouse can get a benefit on his record. Divorcees are not subject to that condition, and can claim spousal benefits once their ex-spouse turns 62, regardless of whether or not that spouse has filed. This gives them an advantage over married couples in that regard.

However, the major error that the author made came in her discussion of what she called “double dipping” (we usually refer to this as free spousal benefits or a restricted application strategy). She said:

If both spouses worked and had Social Security benefits, couples may be able to take advantage of “double dipping.” Assume a wife is the primary earner, but the husband also earns an income. The wife could claim a spouse’s benefit as early as age 62,  but leave her own (higher) benefit alone until 70, which means she could claim a higher amount because she delayed filing for benefits.

The strategy of a spouse claiming a spousal benefit while delaying his or her own benefit until later is viable, but only once that spouse reaches full retirement age (currently 66). The assertion that this can be done as early as 62 is incorrect, and frankly, could wind up costing a Social Security claimant that attempts to implement that strategy a significant amount of money if the misunderstanding isn’t caught by the SSA. As our married persons’ reports show, the difference between following an optimal strategy and a suboptimal one can be quite large, often exceeding $100,000.

It is absolutely vital that you educate yourself about your Social Security claiming options. In addition to our reports, we offer a great deal of free, easy to understand information on our main website. This article is particularly unfortunate because of its target audience – financial professionals. If you work with a financial advisor, encourage him or her to learn about the intricacies of the Social Security system, or use a resource like SocialSecurityChoices.com, so that misinformation does not get disseminated. After all, the Social Security benefit claiming decision has been described as the most important financial decision one makes, so it’s worth getting it right.

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