< Back to posts

Social Security Strategies

Published by: Wes Brown, CFP® Date: June 25, 2015

Social Security is most Americans’ largest retirement asset. And today, like every day, some 10,000 baby boomers will reach retirement age and become eligible to receive Social Security benefits. Unfortunately, the Social Security system is ridiculously complex. When you consider that Social Security’s handbook has in excess of 2,700 separate rules governing its benefits determining the right strategy is nearly impossible to do on your own.

It is critical to get this right. Simply taking benefits at the earliest possible time without any strategizing can cost almost everyone a lot of money. Many people don’t understand that there is often more than one benefit available to them and there are different strategies for taking them. To make matters worse, the folks at the local Social Security offices routinely tell people things that aren’t correct about what benefits they can and can’t receive, and when they can receive them.

Before filing to receive Social Security benefits, here are some things to think about:
• If you start taking Social Security before your Full Retirement Age (FRA), the benefits are subject to an early retirement reduction for every month you do so. That includes widow(er) benefits available to current and former spouses. Conversely, the Social Security Administration raises your personal retirement benefit for every month you wait to claim your benefits beyond your FRA. This Delayed Retirement Credit is eight percent per year until you turn age 70.

• Speaking generally, it’s best to wait until age 70 to start collecting retirement benefits. About half of Americans choose to collect at age 62 because they have no other savings, but the payout in real dollars (inflation adjusted) is 76 percent higher if you start collecting at age 70 than if you start at age 62. For example, if your Social Security retirement benefit was going to be $1,000 per month at age 66, it would be reduced 25 percent to $750 if you claimed benefits at age 62. However, if you didn’t start collecting until age 70, the benefit would increase 32 percent (four times the eight percent annual increase) to $1,320.

• If you stay married for a full 10 years prior to getting divorced, then you and your (former) spouse will qualify later for what would be called divorced spousal and divorced widow(er) benefits. Keep in mind that if you later remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends (whether by death, divorce or annulment).

• If dependents need money more quickly, it might be better to file at age 62, suspend at age 66, and then re-file at age 70. Ultimately, the goal is to maximize your longer-term payout.

The bottom line: Social security is complicated and there’s no one plan for everybody. Unfortunately, Social Security has some nasty provisions that mean taking the wrong benefits at the wrong time can cause you to get smaller benefits forever. Even still, 60 percent of people file for Social Security benefits without talking to anybody about it. Take the time before you file to make sure you collect the right Social Security benefits at the right time. It will be one of the biggest and most valuable financial decisions you’ll ever make.

Wes Brown is a Senior Financial Advisor with Rather & Kittrell.  He is available at