In a prior post, “When should I start drawing Social Security retirement benefits?,” I recommended drawing a Social Security retirement benefit at full retirement age (FRA), even if the retiree does not need the money. Wage earners who were born between 1943 and 1954 reach FRA when they turn 66. I pointed out that if a wage earner who has a full retirement benefit (FRB) of $18,000.00 per year puts off drawing the benefit from age 66 to age 70, he or she will be $72,000.00, plus COLA, behind the wage earner who did not wait. It would take many years just to break even.
There might be an exception for a single retiree who has very high income and is therefore in a high tax bracket, but plans to retire at age 70. Then the tax burden on the Social Security benefit might make it preferable to postpone drawing Social Security. For almost any other single wage earner, it is better to start drawing at FRA.
Couples present a much more complicated situation, my colleague, Avram Sacks, informs me. He is an expert on Social Security benefits with a national reputation. There are many options that could increase Social Security benefits for the couple by 25% or more. For example, a husband might claim a benefit and then suspend the benefit when his wife approaches FRA. This allows the wife to then claim a spousal benefit. Then, when the husband reaches age 70, he reinstates payment on his own account, and when the wife reaches 70 she gets the higher of either her own benefit or the spousal benefit. Choosing the best option involves balancing many factors – each person’s age, Social Security account balance, other income, health and family longevity, and likely earnings to age 70.
According to the Social Security Period Life Table, a 70-year-old person has a 14.07-year life expectancy. If a couple begin drawing Social Security benefits of $1,200 each at age 70, their total benefit over 14 years would exceed $444,000. A 10% improvement would boost their total benefit to close to a half million. An attorney who is knowledgeable about Social Security could make a big difference to a couple if consulted when they first become eligible to draw a benefit – that is, at age 62. Too few couples realize that there are attorneys who could tell them how to maximize their benefit, or are willing to pay for a consultation. Avram said this recently:
Even if they are told that they could be leaving $150,000 to $200,000 on the table, it is very difficult for people to wrap their brain around spending money to learn about money they don’t have. A couple might willingly spend $10,000, $15,000 or more to preserve $100,000 of mom’s estate from the Medicaid boogeyman, but ask them to spend one tenth of that amount to see how they might possibly get that same amount or more from their SS retirement, they just won’t do it. I don’t know why other than the fact it’s not in front of them right now. Agreed, there is some uncertainty – the couple could pay for the analysis and then get hit by a bus tomorrow. But, that really is such a small risk for the insurance of being more financially secure. Indeed, people willingly fork over tons of money to buy insurance, yet they won’t pay a few bucks to learn what strategy will optimize benefits for themselves.
For a consultation that could boost your Social Security retirement benefit, or at least assure you that you are not missing out on a higher benefit, contact a Social Security guru like Avram. Otherwise, you may wish you had. For a referral, contact:
John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
©2014 John B. Payne, Attorney