I've written about this topic before. But I just have to do it again. If my emails are any indication, it seems as if 90 percent of senior citizens in this country are worried sick that they are losing out on Social Security benefits, or making decisions that result in dramatically reduced monthly checks from the government. And in almost all the cases I encounter, their worries are ill-founded.
I started working for the Social Security Administration in 1973. And my mentor was a guy who was with the agency almost from its inception in 1935. He retired in about 1980, and I retired in 2005. And in all those years, neither one of us ever met a Social Security recipient, or a potential beneficiary, who worried one little whit about getting the most out of his or her monthly benefits. "Maximizing" one's Social Security was just not part of the lexicon. The majority of seniors signed up for their retirement benefits at 62. Some waited until 65 (the full retirement age for the first six decades of Social Security's existence). A very few people, and I mean a VERY FEW, waited until age 70 to start their benefits.
But then two things happened. In the late 1990s, some unintended loopholes grew out of a new law that allowed senior citizens over age 66 to work without any reduction in their benefits. Those loopholes became known as "file and suspend" and "file and restrict." They have been discussed ad infinitum in this column and will not be explained here again, other than to say that, in a nutshell, they allowed retirees to collect dependent spousal benefits on a husband's or wife's Social Security record while delaying their own benefits until 70. Congress eventually recognized these loopholes violated the basic tenets of the program and closed them. Or to be more precise, they immediately closed the "file and suspend" provisions and put a time clock on "file and restrict." Only people turning 66 before January 2020 can still jump through the spousal benefit loophole.
The bigger thing that happened is that financial planners discovered a new and huge market: greedy geezers! They lured them into seminars with come-ons like this one I just got in the mail this week: "You could be missing out on thousands of dollars in Social Security benefits!" Because of them, the term "maximizing your Social Security" became the catchphrase for a generation who 40 years earlier were chanting "make love, not war!" Now they are crying, "Make money, not love!" I mean, who needs sex, drugs and rock and roll when you can have a bigger Social Security check?
Let's look at just a couple of the emails I got this week from seniors who are caught up in all this hoopla about maximizing benefits.
Q: I signed up for my Social Security when I was 66 years old. That was 10 months ago. I am getting $2,225 per month. Now I just learned that I could have maximized my Social Security by filing for wife's benefits on my husband's record and saving my own until age 70 when I would get higher benefits. He is 73. He started his benefits at age 70. He gets $2,850 per month. So now I'd like to cancel my retirement claim and then file for wife's benefits. I understand I can get half of his, or $1,425. Can I do this? And how do I do this?
A: Well, yes you can do this, although not at quite the money amounts you think. And you really should think long and hard before jumping on this maximizing bandwagon. I mean, you and your husband are already getting over $5,000 per month in Social Security benefits. That is far more than the average Social Security beneficiary can even dream about. But if you are intent on squeezing every last nickel out of your Social Security piggy bank, here is what you should do.
Make an appointment to talk to someone at your local Social Security office. Tell them you want to withdraw your retirement claim. (You have up to 12 months after your benefits start to do that.) You will have to repay all the benefits you've already received. That sounds to me like you'll be writing the government a check for $22,250.
After you withdraw your retirement claim, you will then turn around and file a claim for wife's benefits on your husband's account. But you won't get half of his current benefit. You'll only get half of his full retirement age rate. I'm guessing that's about $2,150. So your share of that is $1,075. You can claim up to 6 months' worth of retroactive spousal benefits.
Once you make that switchover, you will keep getting $1,075 per month, until you turn 70. At that point, you would refile for your own retirement benefits, and get 132 percent of your basic rate, or about $2,900 per month. Good luck with all that!
Q: Both my wife and I are about to turn 62. We went to a seminar about maximizing Social Security benefits. I was told that I could file for husband's benefits on my wife's record and then save my own until age 66. But the Social Security people said I can't do that. Are they right? We are worried that we are missing out on Social Security benefits that everyone else is getting.
A: The Social Security people were right. If you are under your full retirement age, the law says you must file for your own retirement benefits. And the loophole mentioned at the beginning of this column, the one that let people 66 and older file spousal benefits while delaying their own benefits until 70, closes before you reach your full retirement age.
So now you are your wife simply have to make one of three Social Security decisions. Do you want reduced retirement benefits at 62, or some other age between 62 and 66? Or do you want full benefits at age 66? Or do you want to wait until age 70 and get 132 percent of your full retirement age rate?