Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin on what your clients really want when they talk about retirement.

Best laid Social Security-claiming plans gone awry

If you see something, say something

Nov 26, 2013 @ 11:05 am

By Mary Beth Franklin

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The other day, I received a frantic e-mail from a reader desperate to undo a Social Security claiming decision that was turning out all wrong.

Gary, a reader from South Carolina, said he heard me talking about the “file and suspend” strategy for married couples claiming Social Security benefits during a recent Money Hour radio show with financial adviser James Lange of Lange Financial Group in Pittsburgh.

I explained that in order to take advantage of the “file and suspend” strategy, one spouse must be at least full retirement age. At 66 or later, one spouse — preferably the higher earner — can file a claim for Social Security benefits and immediately suspend his own benefit in order to trigger spousal benefits.

In the meantime, the worker’s own retirement benefits would continue to earn delayed retirement credits worth 8% per year for each year he postpones claiming benefits beyond his full retirement age up to 70.

At 70, the higher-earning spouse could start collecting his Social Security benefits, locking in not just his highest retirement benefit amount, but ensuring a maximum survivor benefit for his spouse if he dies first.

Although his spouse would not benefit from the delayed retirement credits during her lifetime, her survivor benefit will be worth 100% of what he received or was entitled to receive at the time of his death — including any delayed retirement credits — if her husband died first.


It’s a great strategy for some married couples, particularly when one spouse has little or no earned income to qualify for Social Security benefits on her own.

“I believe that the Social Security office gave me incorrect information in March of 2013 about file and suspend and I now have a mess on my hands,” Gary wrote me in an e-mail. “I only want to protect my family’s Social Security benefits and make sure that my wife's survivor benefit is the higher amount.”

Gary explained that his wife has never worked outside the home and does not qualify for Social Security benefits on her own. He wanted to file and suspend so his wife, who is two years older than he, could collect benefits.

The problem is, Gary tried to file and suspend when he was too young to do so. And, he says, his local Social Security office allowed him to file paperwork to file and suspend his benefits in March 2013 when he was only 63.

That seems odd.

William “BJ” Jarrett of the SSA national press office in Baltimore confirmed that the agency’s “systems typically won’t allow representatives to process a suspension case if the claimant hasn’t reached full retirement age.”

I think Gary’s request got lost in translation, which is understandable as the terminology for various Social Security actions can be confusing. He thought he had done one thing, when actually he had done something quite different.

I suspect the local Social Security office accepted his application for retirement benefits but suspended his payments because he was still working and earning more than the annual earnings cap limit for someone who collects benefits before full retirement age. In 2013, beneficiaries lose $1 in benefits for every $2 earned over $15,120.

When Gary’s wife applied for her Social Security spousal benefits a few months later, she was told her benefits would begin in November.

“She did not receive a check in November 2013 and after several calls, we were told that there was a hold on the payment as I was still working,” he wrote. “They also mentioned that this might lower my full retirement payment when I reach 66.”

Gary apparently didn’t realize that by filing for Social Security benefits before his full retirement age while he was still working meant that he would reduce his — and his wife’s — retirement benefits, defeating his intended purpose of locking in the largest possible retirement benefit for himself and potential survivor benefit for her.


Because Gary was within 12 months of first claiming his Social Security benefits, I advised him to file SSA Form 521 to withdraw his application for benefits, erasing any claim, and to reapply for benefits when he turns 66, which would trigger benefits for his wife, too.

So what’s the lesson for financial advisers? Just as we are cautioned whenever we are in a public place, such as a train station or airport: If you see something suspicious, report it to the proper authorities.

Similarly, if a client talks about claiming Social Security benefits before full retirement age that don’t ring true, ask questions. It could make a huge difference in their long-term financial security. Remember, to exercise the most creative Social Security claiming strategies, you must be at least 66 years of age. That’s why I call 66 the “magic age.”

So if you see something, say something. And if you aren’t sure, write to me.


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