“Secret” Social Security strategies for advisers

May 3, 2010 @ 4:01 pm

By Lisa Shidler

Most financial advisers are unaware of Social Security strategies that could help increase their clients' payments by thousands of dollars per year.

That's according to Mary Beth Franklin, an editor at Kiplinger's, who spoke today at InvestmentNews Retirement Income Summit in Chicago. She urged advisers to learn more about Social Security “secrets” and suggested that at least one adviser in every practice should be an expert on Social Security.

“Social Security should be managed just like any other asset in your client's portfolio,” she said. “It's a very valuable asset. But there needs to be a specialist managing it. It's a great value-add for an adviser to have right now.”

One of the strategies few advisers don't know about, she said, is what she calls a Social Security “do-over.” This occurs when an individual who had begun collecting Social Security benefits at 62 decides to defer any further payments until 70. That increases the payments at 70 by as much as $1,000 month.

For clients who had already begun collecting Social Security, they would need to pay back income they've received. But she said there aren't any penalties or interest when paying back benefits.”

This strategy, of course, may not work for all clients, Ms. Franklin said.

Another little-known strategy, which she dubs the “Viagra College Fund,” the child of any individual collecting Social Security can claim about half of the parent's benefits. Advisers should also make sure to have clients claim a spousal benefit. For example, a wife who is at least age 62 could apply for Social Security, while the husband who is still working could apply for a spousal benefit. At 70, the husband could switch to his own higher benefit.

Mr. Franklin said many advisers aren't aware of the “file and suspend” strategy. For example, she said, a husband files for his benefits and his wife files for the spousal benefits. The husband then requests a suspension of his benefits but the wife continues to get the spousal benefits. The husband's benefit will continue to grow until he chooses to begin taking payments.

Ms. Franklin believes many advisers could bolster their practices if they learned more Social Security benefits. She said consumers need help trying to figure out these complicated rules.

“While these rules are on the book, they're nuances,” she said. “It can be a nightmare. I tell people this is your right and this is what the law says.”

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