The Social Security Question
When it comes to the pros and cons of when to take your Social Security benefits there’s an ongoing debate. Is it better to start withdrawing at 62, or wait until you reach 70? How much difference will it make monetarily?
According to Jennie L. Phipps in: “7 Secrets You Won’t Learn from Social Security,”everyone is pretty much on their own when it comes to making this very important decision, because the Social Security Administration is certainly not going to advise you.
Waiting to Withdraw
Phipps quotes Alicia Munnell, director of the Center for Retirement Research at Boston College, who says it’s hard to beat waiting until you’re 70 because the monthly payment is 76 percent higher than it would be if you had started to take benefits at 62. It’s also 32 percent higher than it would be if you had claimed at age 66.
Those stats may be true but several important factors often mitigate against waiting. Many people need the cash, are fearful that the program might change (or collapse), or are trying to avoid tapping their savings for as long as possible.
Strategies to Beat the Odds
But here’s something else to consider. Did you know that there are a number of little known ways you can maximize your Social Security benefits?
suggests readers consider ways to maximize their Social Security benefits, instead of grabbing a check at age 62, as about half of all retirees do. He highlights a growing number of Web-based tools that can be found at sites like SocialSecuritySolutions.com, AARP.com, AnalyzeNow.com, MaximizeMySocialSecurity.com and the Social Security Adminstration’s site. Here you can run dozens of possible claiming strategies — and get recommendations on how to maximize benefits.
How might one such strategy work? Ruffenach offers husband and wife Bob and Carol, ages 62 and 58 respectively. Bob will receive $2,000 at his full retirement age of 66, while Carol will receive $1,600 at her full retirement age, also 66. Each, of course, can claim Social Security at age 62. If they do so — and Bob lives until 83 and Carol lives until 90 — their cumulative benefits will be $840,600.
But Ruffenach notes that SocialSecuritySolutions.com offers a more lucrative — and slightly more complex — strategy. At his full retirement age, Bob can claim a spousal benefit of $800. Carol, meanwhile, claims a benefit (based on her earnings) of $1,200 at age 62. At age 70, Bob switches to a monthly benefit of $2,640, based on his earnings history, a move that falls under “delayed retirement credits.” In this case, the couple’s lifetime benefits will total $1,043,520, a gain of almost $203,000 over the let’s-get-it-while-we-can approach.
In an online Yahoo Finance article: “Secrets to Maximizing Social Security,” Mary Beth Franklin offers an option she calls “Retirement Do-Over.” How does it work? If you are already receiving benefits, you can take advantage of an obscure provision that allows you to repay your benefits, interest- and penalty-free, and then reapply for a bigger monthly check at an older age.
What We Suggest
The whole question of Social Security benefits is a complicated one. And, clearly, there is no one right way to handle the situation.
While the research does show that waiting until 70 to withdraw your money is probably a wise decision – it is not feasible for everyone. With this in mind we wanted to bring to light a few less well-known options.
The best advice we can offer is this: when you are ready to make a decision about your Social Security benefits, first make an appointment to sit down with your financial advisor. Let them help you decide whether you can wait a bit longer, or whether you do indeed need to start withdrawing funds now.