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Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.

Role reversal: Readers answer Social Security questions

May 19, 2014 @ 11:16 am

By Mary Beth Franklin

social security, retirement income summit
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I always look forward to the annual InvestmentNews Retirement Income Summit, which allows me to connect with many of my readers in person. This year's summit, held May 12-13 in Chicago, was no exception. But as many of the hundreds of attendees are repeat visitors, I wondered what I could do to shake things up and hold their attention for yet another one of my presentations on Social Security rules and claiming strategies.

I decided the best way to help financial advisers understand the often-complex Social Security rules was to pose real-life client situations — typical of the questions that I receive every day — and to ask the members of the audience what they would do. Knowing that some people might be reluctant to attempt an answer a question in front of more than 200 strangers, I added an incentive: gift cards. Every answer, right or wrong, was rewarded with a gift card to Amazon, iTunes and a variety of other vendors.

(Click here to access Mary Beth Franklin's new e-book, "Maximizing Your Clients' Social Security Retirement Benefits)

We had a blast! It reminded me of hosting countless birthday parties for my sons — now 27 and 30 — so many years ago. All we were missing was the cake!

Afterwards, several of the attendees said they found the questions and answers so helpful, they asked if they could have a copy. What a great idea! So my next few blog posts will include some of those questions and answers.

But first, I wanted to share a funny travel story. In my attempt to fly home from Chicago, I got caught up in some hellacious travel delays due to weather and other events. I wandered around the airport terminal with other folks desperate to find an electrical outlet to charge our dwindling phone batteries. I thought of us as members of the “technorati diaspora.”

At one of the charging stations, a man kept staring at me, saying I looked familiar. It turns out he works for the Social Security Administration. (He showed me his government ID) I told him my name and he said, “That's it! I've seen your face on a dartboard!” My friends at the SSA press office assure me it's not their office — but it's a big agency! If it's true, I consider it a badge of honor.

Now it's time to try your hand at my version of Social Security Trivial Pursuit.

Question #1

Can a spouse, who has not earned sufficient Social Security credits on her own, claim spousal benefits once she turns 62 years old even if her husband has not yet claimed benefits?

Answer #1

No, not until her husband files for his benefits. Although she is old enough to claim Social Security benefits, she is not entitled to benefits on her own earnings record. But she is eligible to claim benefits as a spouse based on her husband's earnings record. However, she must wait until her husband claims his benefit — or files and suspends at full retirement age — to trigger her spousal benefits before she can collect.

Question #2

Assume both spouses are 62 and each has earned sufficient credits to qualify for Social Security benefits. Can the lower-earning spouse claim reduce benefits on her record now and step up to a higher benefit later when her husband either claims his benefits or files and suspends at 66?

Answer #2

Yes, the wife can collect reduced benefits now and step up to a higher spousal benefit once the husband files and suspends. But her total benefit will be worth less than half of his full retirement age benefit because she collected her own retirement benefits early.

Question #3

How can a married couple, where both spouses have reached full retirement age and each is entitled to benefits based on his or her own work record, maximize their lifetime Social Security benefits?

Answer #3

They can exercise a combination claiming strategy. At 66, one spouse can file and suspend to trigger spousal benefits for the other spouse. The second spouse can file a restricted claim for spousal benefits only. At 70, they can each switch to their maximum benefits worth 132% of their full retirement age benefit.

Question #4

If a husband decides to postpone collecting his Social Security benefit until 70, will the wife's spousal benefit be worth half of that larger amount?

Answer #4

No. The maximum spousal benefit is based on half of his full retirement age benefit or primary insurance amount, not half of the larger amount. Spousal benefits do not earn delayed retirement credits that are worth 8% per year for every year you postpone collecting retirement benefits beyond full retirement age up to 70.

Question #5

If spousal benefits don't qualify for delayed retirement credits, what's the point of postponing benefits until 70?

Answer #5

Maximizing the higher-earning spouse's retirement benefits also locks in the maximum survivor benefit worth 100% of what the deceased worker collected or was entitled to collect at the time of death.

For more on our question and answer session on Social Security, please see my next blog.

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