Fund your child’s tuition with Social Security

I bumped into a former colleague at a memorial service recently. It seems I’ve been attending lots of memorial services recently. Old journalists are dropping like flies. But retired scribes craft the best eulogies. Who could top this bon mot delivered during a gathering at the National Press Club in Washington? “Before there was Google, there was Judy. She could find the answer to anything.”
During that event, I was catching up with old friends. One noted that he had turned 66 earlier this year and is still working for a major news service, but is thinking of retiring. He happened to mention that he has a 13-year-old son.
“Don’t make any decisions until you talk to me,” I told him.
(More: 10 ways to maximize Social Security benefits)
When he contacted me a few weeks later, I explained that since he had already reached his magic age of 66, he could file and suspend to trigger Social Security benefits for his son, while allowing his own retirement benefits to continue to grow by 8% per year for each year he postponed collecting them beyond his full retirement age up until age 70. The result would be a 32% boost in Social Security retirement benefits.
I also told him that because he had turned 66 in February, he could request that his filing date be backdated to his birthday month, as long as the retroactive period didn’t exceed six months or predate his 66th birthday.
“I went to Social Security this afternoon and filed the necessary paperwork, clearing the way to increase my family’s income by $13,000 for the final 10 months of this year,” he wrote in a follow-up email. “Yes, they are paying retroactive benefits for my son, Hank, 13,” he explained. “The additional money will cover my son’s tuition at middle school with some left over to put a little more in his college fund.”

It just proves that memorial services truly are for the living, offering a time to mourn the loss of a friend or loved one and to reconnect with people from the past. For my former colleague, our chance encounter led to money in the bank.

(Related: At long last, boomers begin to retire)

About the same time, I received an e-mail from a reader in Nashville, Tenn., who said he had an insurance client that had already crossed the magic age threshold but who had no plans to collect Social Security until he turned 70. Michael McCormick, a financial representative with the Innovative Financial Group, worried that his client may be leaving money on the table. He was.

“I have a client who is 66½ years old who qualifies for Social Security benefits of $3,000 per month,” Mr. McCormick wrote. “His 68-year-old wife is already collecting $2,000 per month on her own work record,” he added. “I told him he was losing $1,000 per month in free benefits.”
I agreed. “As he has already reached full retirement age, he can file a restricted claim for spousal benefits of $1,000 per month — half of his wife’s full retirement age benefit — plus he is entitled to a lump sum payment of up to six months of back benefits,” I wrote.
Mr. McCormick sent his client to the local Social Security office to confirm my recommendation.

“Our client went to Social Security and spoke with someone there who knew exactly what to do,” he reported. “He got his spousal benefits set up along with six months of back benefits beginning when he first turned 66.”

Millions of people have no idea about the true value of the benefits they have earned throughout their careers.