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How to Make the Most out of Social Security

Feb. 13, 2013
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Knowing how to apply for Social Security benefits, when you are eligible for Social Security, and figuring out the best time to apply for the benefits is difficult and confusing. Many recipients simply stumble into the system and take what the government’s offering with little forethought or strategizing. I know that’s what I did. But the fact that you can take this “free money” at any time after you’re 62, combined with the generosity of the Social Security Administration (SSA) toward your spouse, your ex-spouse, and even your minor children, creates a confusing welter of opportunities that only an expert can really feel comfortable with. Of course, it’s really your money, which you and your employers have paid into the system over decades, but the clerks at the SSA office can’t really advise you about how much of it you get back.

As Angela S. Deppe, founder of, points out,

“While the Social Security Administration is the expert on the subject, they can only answer questions. They are not allowed to advise individuals and present strategies to maximize monthly benefits.  As a result, 75% of Americans are collecting their benefits early and permanently reducing their benefits and potentially their spouse’s benefits as well.  This means that retirees are leaving hundreds of thousands of dollars on the table that they earned by paying into the system for many years.”

Don’t rush

Fortunately, I made one of the best Social Security moves there is without thinking about it very much: I waited. Sure, I read those helpful letters that the SSA used to send out listing my benefits at several possible ages, but I was happy with my job and the paychecks that it provided, so I just didn’t do a thing. According to Roger Cowen of the Cowen Tax Advisory Group in Hartford, Connecticut, that’s the wisest thing I could have done:

“Timing is everything. Waiting to claim Social Security is one of the best things you can do to improve your retirement security. Taking benefits before full retirement age results in a permanent reduction of as much as 25% of your benefit. And there’s a big bonus for delaying your claim beyond your full retirement age — your benefit will grow by as much as 8% a year from your full retirement age up until age 70. Any cost-of-living adjustments will be included, too.”

Spousal benefits

Married couples must plan even more carefully. As Cowan says, “When making a decision about your benefits, don’t consider only your own earning record; also consider your spouse’s benefits. Every married person can choose between two different options when electing Social Security benefits – their own benefit or a spousal benefit, which is 50% of their spouse’s benefit.” Divorced-spouses count too, says Cowan, if the marriage lasted at least ten years: “If there are multiple marriages, the person would want to pick the work record that will get them the largest check.”

“File and Suspend”

What if my current spouse is at her full retirement age (around 66) and ready to retire? That’s where a recent tactic called “File and Suspend” comes in: I file at my full retirement age, but don’t take my benefits, because I want them to keep growing. But my spouse can file for an amount equal to half of what my current benefit would be – or her own benefit, of course, depending which is larger. Here’s how Charles C. Scott, an Accredited Investment Fiduciary with Pelleton Capital Management in Arizona, explains it in grownup language:

“File and Suspend is used when the higher wage earner wants to delay his/her benefits to age 70 (earning 8% delayed annual credits up to age 70), but wants their spouse to start their spousal benefit before then. The lower earning spouse can’t start his/her spousal benefit until the higher earning spouse has filed for their own benefit, so at full retirement age the higher earner files and then immediately suspends their benefit in order for the lower earning spouse to claim their spousal benefit.”

Long-term thinking

As Ms. Deppe points out, the fact that the higher wage earner lets his or her benefit increase helps the couple even if the higher wage earner should pass on first. If a husband earning more than his wife puts off collecting payments, he’s helping out his wife if he predeceases her. “Because he delayed the collection of his individual benefit, he not only maximized his own benefit, but also the survivor benefit paid to his wife,” she explains. “This strategy typically produces $150,000 to $200,000 of additional Social Security income for a couple that would have been lost if he had collected early at age 62.”

Another strategy

If your spouse is getting her checks and you’re at full retirement age, and you can use an amount equal to half of what her benefit is, you can file for the spousal benefit but make no claim at all for yourself – cagily waiting until you reach age 70 and the maximum payout. That’s called “restricting the scope of the application” at the SSA window. Attorney Steven J.J. Weisman, author of “A Guide to Elder Planning,” points out “this strategy works best when both husband and wife have worked and earned higher Social Security amounts.”

There are quite a few options hidden in the Social Security guidelines, and everyone seems to explain them slightly differently. Having an expert on your side – and at your side – when you make these long-term decisions could be a very good investment. You’ll take the dividends for the rest of your life.


Senior citizen image via Shutterstock