On Retirement

Secrets of social security: Your questions answered

Apr 10, 2012 @ 2:59 pm

After a recent appearance on Consuelo Mack's WealthTrack (watch here) discussing Social Security, InvestmentNews contributing editor Mary Beth Franklin quickly received more than 100 inquiries from advisers and investors about strategies and techniques for most effectively tapping this cornerstone of retirement income.

Below are two recent questions from advisers directly to Mary Beth, who will be using this blog to field and answer more of your questions on this important subject:

Mary Beth,

I read your article today ('I struck a nerve talking about Social Security!) and I thought you could answer this question easily.

I have racked my brain trying to figure out why people would wait as long as possible to begin drawing social security. Since there is no valuable death benefit to social security then you only draw from the system how many checks you receive. Why wait? I know the amount goes up, but unless you know what your longevity will be, you are really rolling the dice. When I have a client whose health, or family health history, is sketchy, I recommend drawing. Can you help me see clearly on this one?

Joshua M. Holden, Holden Wealth Management

Joshua:

Certainly, if you have a client in poor health, he or she should claim as soon as possible at age 62.

However, for most people, the concern is longevity and running out of money toward the end of their lives. For many, Social Security is the only form of guaranteed, cost-of-living adjusted income they can count on for life.

Married couples, particularly, should coordinate their claiming strategies. In some cases, it makes sense for the lower-earning spouse, usually the wife, to claim benefits early. Even though her retirement benefits will be permanently reduced, her survivor benefits will not be affected as long as she is at least normal retirement age (66) when she claims them. At that point her own retirement/spousal benefits will disappear.

Hope this helps.

Mary Beth

Dear Mary Beth,

Can a un-remarried divorced spouse take the ex-husband's social security spousal benefit at 62 and not take her's until she reaches 70, only if her benefit at 62 would be less than the ex-spousal benefit would be for her at 62?

The SS page states one of the conditions includes: ” The benefit that your ex-spouse is entitled to receive based on his or her own work is less than the benefit he or she would receive based on your work”.

In my question above, if the un-remarried divorced spouse SS at age 62 is more than the ex-husband's, does this mean she cannot take the spousal benefit at age 62? And therefore delay her SS to age 70?

And by “more”, are they comparing it to the spouses' full benefit or to the 50% of the spouse's?

Thanks for the great presentation. I‘m going to look for your articles on WealthTrack to print out.

Regards, John

John N. Reynolds

Financial Advisor

Senior Vice President - Investments

Municipal Securities Principal

Registered Investment Advisor Representative

Investment Advisory Programs Director

Clark Dodge and Company, Inc.

Thanks for the rave review, John.

Any time you claim benefits before your normal retirement age (66), you must accept the largest benefit to which you are entitled whether it is on your own record, a spouse or ex- spouse, or a combo.

You can only segregate benefits... I. E. restrict your claim to spousal benefits only... if you wait until age 66 to claim.

Your own uncollected retirement benefits continue to grow by 8% per year until age 70 at which point you can switch to your own. Hope that explanation helps. Spread the word. I'll be discussing this and answering advisers' questions at the InvestmentNews Retirement Income Summit in Chicago on April 30-May 1.

Do you have questions for Mary Beth Franklin about the secrets of Social Security? Use the comment box below, or e-mail May Beth Franklin here.

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