Creative claiming strategies increase Social Security benefits

Knowing how to maximize Social Security benefits for individual clients is an increasingly important skill for financial advisers as baby boomers continue to enter into retirement age.
In an InvestmentNews webcast Tuesday, Social Security expert Mary Beth Franklin outlined the two powerful claiming strategies known as “file and suspend” and “restricting a claim to spousal benefits” and outlined specific examples of how and when each one is best for clients.
According to a recent Mercer study, people of average or above average health would benefit by delaying Social Security benefits until age 66 or even up to age 70.
“Delaying Social Security benefits until they’re worth more can be a great strategy for some people,” said Ms. Franklin, an InvestmentNews contributing editor, who noted that individuals have to have other savings from which they draw before they start drawing Social Security benefits.
(See Mary Beth Franklin discuss the most common Social Security filing mistake)
Individuals can wait until what Ms. Franklin calls the “magic” age, or full retirement age, of 66 to file and suspend benefits, meaning that they file for retirement benefits to trigger their spouse’s benefits but defer collecting their own until a later time. The worker can accumulate delayed retirement credits worth up to 8% per year up until age 70.
(More: How to calculate Social Security’s maximum family benefit)
Alternatively, one spouse can choose to restrict a claim to spousal benefits only, assuming that one spouse is already collecting and the other has not yet claimed. For example, at age 66, a husband who has not claimed could receive half of what his wife is already collecting but let his own benefit continue to grow.
Ms. Franklin noted that spouses can use only one strategy to maximize their benefits.
“One spouse can file and suspend. They both can’t do it. They can use a combination strategy,” Ms. Franklin said.
She also discussed how children can factor into a claiming strategy.
“When a parent is entitled to retirement benefits and they have a child under 18 in their household, that child is also entitled to a benefit worth 50% their benefit. That can play into the decision of when to claim,” Ms. Franklin said. “As an adviser you have to look at the whole picture — does it make sense to claim benefits early if a child is involved?”
Single clients can face different options when it comes to claiming.
“If I filed and suspended at 66, I can request a lump sum payout. Two years’ worth can be paid to me as a lump sum, but that is instead of getting a delayed retirement credit,” said Ms. Franklin. This is a great strategy for a single client since they don’t need to worry about spousal benefits, she added.