This week on the Retire With More Show we were very fortunate to have none other than Mary Beth Franklin. She is the author of the book Maximizing Your Social Security Retirement Benefit, has had a successful career as a contributing editor to InvestmentNews and was a senior editor at Kiplinger’s for 13 years. As a financial advisor, Mary Beth is a nationally recognized expert in Social Security, focusing on claiming strategies and ways to optimize how you claim your benefits, which can amount to an extra $100,000 over your lifetime.
We all plan to benefit from Social Security, but the game has changed. There are 2,728 core rules and, according to Mary Beth, half them are exceptions to the first rule.
“You can collect retirement benefits as early as 62, but if you do your Social Security benefits will be permanently reduced for the rest of your life by 25% or more. However, if you wait until your full retirement age of 66, you can engage in some creative planning strategies that can mean a lot more money over your lifetime.” – Mary Beth Franklin
And the big bonus is that if you wait until age 70, you get an extra 8% per year. The difference between collecting as soon as possible at age 62 and waiting until age 70 is a 76% increase in your Social Security benefits.
There are two creative claiming strategies to maximize your Social Security benefits and in both cases you must wait until at least at your full retirement age before you are allowed to use them.
The most powerful one is called “file and suspend.”
“It’s very literal in that you are filing for your benefits but you are suspending them. When a person reaches the full retirement age of 66, they are going to file for their Social Security benefits, but then they are going to hold off on collecting them just yet so that they keep growing at 8% per year up until age 70. If you were married you might want to use this strategy because your spouse, who might not have any benefits of his or her own, is entitled to half of your benefits in addition to what you get as a spousal benefit.” – Mary Beth Franklin
That gives your spouse the benefit now and lets your benefits keep growing until they are worth the maximum amount. This is important because not only will it give you more money for your joint lifetimes but also because whichever spouse dies first, the larger benefit is going to continue as the “survivor benefit” and the smaller benefit is going to go away. Social Security acts not only as a personal pension but also as a life insurance policy.
The second creative strategy is filing a restrictive claim for spousal benefits only.
“If you are full retirement age, you can have Social Security pay you just your spousal benefit while your own benefits continue to grow. That’s a very powerful strategy for married couples and allows you to ultimately maximize your benefits so that you get some money now and more money later.” – Mary Beth Franklin
If you already have claimed benefits early and now regret it, you might have a chance for a do-over. There are two possibilities.
“Within the first 12 months of claiming benefits you have the opportunity to change your mind and withdraw your application to start collecting. You would have to pay back any benefits that you had received, but it wipes the slate clean and you can start over fresh at an older age, when your benefits are worth more. If you miss that 12-month window, there is a second opportunity. You have to wait until your full retirement age, which is currently 66, and then you can voluntarily suspend your benefits. You wouldn’t get any benefits during that suspension for up to four years but, in the meantime, for every year you postpone collecting between 66 and 70 you’re going to add an extra 8% to your base benefit.” – Mary Beth Franklin
It effectively means that if you collected a reduced benefit at 62 and at full retirement age suspended your benefits until age 70, you will have restored virtually all of the benefits you lost to that early claiming.
Make sure you tune in live next week to Retire With More. Join me and John Rothmann Saturdays at 9 a.m. on KKSF Talk 910.