Making Your Money Last
What You Need to Know About
Social Security
By Laura Cohn, Associate Editor
From Kiplinger's Personal Finance magazine, March 2010
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If you're considering filing for your social security benefits, here are five ways to ensure you get the biggest possible check:
1. Patience pays off. The longer you wait, the bigger the check. You can start collecting Social Security as early as age 62. If you do, however, you could suffer a reduction in benefits of 25% or more for the rest of your life. And if you continue to work, you could run up against the earnings cap, which in 2010 dings you $1 in benefits for every $2 you earn over $14,160. But wait until your normal retirement age of 66 (for those born between 1943 and 1954; older for those born later) to collect and you can earn as much as you want without trimming your benefits. Plus, that larger first check becomes the basis for future cost-of-living adjustments.
SEE ALSO: The Mythical Social Security Crisis of 2011
2. Marriage has its perks. Couples have the most flexibility. Say your husband's lifetime earnings are much higher than yours. You're ready to start collecting benefits based on his record, but your husband is not ready to retire. The solution: Once he reaches his normal retirement age, he can file and suspend, meaning that you can collect your share while he waits to collect benefits until later, when they will be worth more.
If you have comparable incomes, however, there's a little-known strategy that can boost your total household benefits. Say your wife wants to stop working but you don't. She can claim benefits based on her record. If you are at least 66, you can claim spousal benefits only on her record and put off collecting your own Social Security until age 70, when you qualify for the maximum payout.
3. But you can collect if you decouple. You may be able to collect on your former spouse's benefits, as long as you were married for at least ten years and are 62 or older. (If you remarry, however, you can't collect retirement benefits based on your first spouse's record -- unless your second trip to the altar ends in divorce, annulment or death.) If your ex-spouse dies, you're entitled to a monthly survivor benefit (even if he or she remarried) equal to 100% of what your ex received during his or her lifetime -- assuming it's higher than your benefit. You can even collect your ex's survivor benefits if you remarry, as long as you waited at least until age 60 before you walked down the aisle again.
4. Bide your time. Get a bonus. If you wait until age 70 you can collect even more, thanks to the delayed-retirement credit, which is worth 8% a year. Say your normal retirement age is 66 and at that age you'd collect $1,000 a month. If you wait until you're a septuagenarian, your check would grow to $1,320 -- a full 32% more. If you retired four years early, at 62, your monthly payment would be just $750. With average life expectancies at an all-time high, chances are good you'll be around to enjoy the higher benefits.
5. Ask for a do-over. If you started collecting Social Security and wish you had waited in order to get a higher benefit, you can press the reset button. Honest. You'll need to pay back what you've received -- which could be $100,000 or more -- but the government won't charge you interest. And the taxes you paid? You can request a refund. Essentially, this strategy allows you to take an interest-free loan from the government. Once you repay, Uncle Sam will restart your benefits at the new, higher rate. But it pays to stay in good health because it could take eight to ten years to recoup your investment.
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Reader Comments (44)
Posted by: Escortrider at 02/13/2010 11:02:36 PM
Those people waiting beyond age 65 to apply for Social Security benefits should be aware that they will need to apply separately for Medicare a few months before turning 65. But if you're already receiving Social Security, you will automatically get your Medicare card in the mail.
Posted by: Nomen at 02/19/2010 09:05:23 AM
Whenever statistics are quoted about average lifespans, think about those who didn't make it to that average. Sure a lucky few will and some will even make it to 100. All of us would like to be in that group but most of us won't. At a recent class reunion it became apparent that 10% had died by age 50. Another 10% didn't make it to 60. Of those remaining about 25% had serious health problems. Not scientific but these percentages seem to be pretty representative compared to others that I've talked to from other towns and schools. If you put off retirement until a later age, what good will those higher SS checks be if you don't make it or are in failing health???
Posted by: Annie at 02/19/2010 05:49:38 PM
I'll take my chances. If I live long then I'll have more money to keep me comfortable, and if I die younger I won't miss it will I? :-)
Posted by: David Wick at 02/20/2010 06:10:22 AM
Ms Cohn: Greetings from Algeria! I enjoyed reading your article "What You Need to Know About Social Securit"y especially Paragraph # 4. Bide your time, get a bonus. I turn 68 next month and plan to wait until I'm 70 to start collecting social security. I normally work from January to June and then go back to retirement life. Question: Since I'm done working in July does it make economic sense for me to wait until the following March to start drawing social security? Thanking you in advance David S. Wick Management Officer American Embassy Algiers, Algeria
Posted by: Bob at 02/20/2010 10:36:28 PM
Nomen is correct. With obesity reaching epidemic proportions(33% and rising), the average life span may very well start going down and quite soon. Diabetes, stents, bypasses,and joint replacement are dramatically on the rise. Even with modern medical procedures and drugs, the lifespan of a large number of those approaching retirement age may be far shorter than the current average. Ironically, even Jim Fixx didn't make it past 52 although he popularized running and physical fitness to extend a person's lifespan. The government would love for everyone to put off retiring for a few more years and the annuity salesmen would love to have you keep working and letting them handle even more of your savings. One is saving money and the other is making money. Neither may be in your best interest. There are no real guarantees in life. The death rate will ALWAYS be once per person. Retire as young as you can and enjoy it.
Posted by: Marilyn at 02/22/2010 12:46:58 AM
Question: Is it possible for a 16 year girl to receive social security if her father is 66 years old, has a six-figure income, collects both a pension and social security beneifts? His wife has not reached 55 years old yet. Scenario: We have a friend who is 66 years old. He has a wife and two daughters, 18 and 16, respectively. He is still working, and also collecting a pension from a previous employer. He decided to start collecting his social security...He told us that in addition, his 16 year old daughter is also getting Social Security payments of $1,200 a month. My first response, now I know why social security is broke. My husband and I are stilled puzzled over this.
Posted by: nick at 02/22/2010 10:42:36 AM
Is there a form that is available for that do-over for ss benefits? thank you
Posted by: smn at 02/22/2010 11:42:36 AM
Im with the retire early and enjoy it people!E ven if it is a smaller amount at least you may actually get to enjoy some of your last yrs, instead of working til you die scenario
Posted by: cleve at 02/22/2010 08:22:41 PM
Two questions: Can my spouse and I both collect our full SS benefit when we retire? The info in the article made it sound like you couldn't. Secondly, are taxes taken out of a SS check just like they are taken from my payroll checks? Thanks.
Posted by: Beth at 02/23/2010 03:02:42 PM
I question whether this statement, " If your ex-spouse dies, you're entitled to a monthly survivor benefit (even if he or she remarried) equal to 100% of what your ex received during his or her lifetime -- assuming it's higher than your benefit," is true?? I am wife #3, (thirtysomething) does that mean wife #2 (remarried, fiftysomething, married 10+yrs) can collect on my husband's (sixtysomething, going to draw in 4 years) income if he dies? If that's true, no wonder Social Security is going bankrupt. Then, 2 women will be supported by 1 man's income for years (we have children). And, could you please clarify what the following statement means "at that point" used in this context: "At that point, however, your benefit would disappear because you can't collect two checks." What is the age of "at that point?"
Posted by: Ted at 02/23/2010 03:11:58 PM
Re: delay in taking SS before age 70 and the numbers used. If you start SS at age 66 and live to age 80, you would receive $168,000. If you wait until age 70, you would receive $158,400, leaving $9,600 on the table. (Disregarding COL increases). One must live until nearly age 83 just to break even. I started my SS at age 65 (am now 74) and put the money in a savings account. I continue to work and live off my income. I am way ahead of the curve.
Posted by: Tori J. at 02/23/2010 03:12:00 PM
What hasn't been said (that I could find) is that if you keep working past 65 and earn over a certain amount, you'll be paying THREE taxes on social security. First, you will continue to social security deductions taken; second, you've already paid thousands in SS taxes your entire working life and, third, you'll pay NEW taxes on your social security benefits. There may be others, knowing the government, but this is the only "benefit" that's taxed three times to my knowledge. I simply don't understand why taxes have to be paid on a tax.
Posted by: Jere Pigue at 02/23/2010 03:39:59 PM
Just curious about your item 4. Bide Your Time. Using your example, if you bide your time until you are 70, and miss 60 months at $1000/mo, that is $60,000. Then, if you gain $320 a month, it takes 15.6 years to make that up. Means you are then 75.6 years old before you get the benefit. Or is my math bad?
Posted by: Fred Ruiz at 02/23/2010 04:01:18 PM
Good information, I had planned to wait till I was 65 to start collectiing Social Security but mayby the economy, maybe being laid off, maybe losing your savings in the stock market tends to make you change your plans.
Posted by: Jack Kaufman at 02/23/2010 04:29:28 PM
Re: Bide your time: The monthly payout retiring at 70 as opposed to 66 may be 30% higher. But it will take 150 months to recoup the $48,000 ($12,000/year times 4 years) you missed out on. Not to mention the present value of that money invested at even a low rate of return.
Posted by: Kathy at 02/23/2010 04:55:14 PM
I have a question. In your article, you say you can receive your ex husband's social security if married more than 10 years. We have both remarried and both divorced. I am now single. I was married to him for 24 years. I understood that I could only collect half of his social security, which would be about equal to my full social security. If I could collect his full social security, since it will always be much more than mine, that would be fabulous, as I am now 631/2 and still working. Can I collect the full amount each month WHEN I do retire? Thank you so much for your time and knowledge. Sincerely, Kathy
Posted by: Remy at 02/23/2010 06:42:12 PM
Points 2, 3 and 5 are well taken. Points 1 and 5 need a little more analysis. Currently, if I retire at 62, I'm projected to realize $1,788/month in retirement benefits. If I set that aside into an investment earning 5%, when I'm 67, I'll have over $126,000 (assuming 2% annual COLA). If I convert that into a 19-year annuity (about the current expected remaining life) earning 5% (a very conservative assumption), I'm indifferent between the cashflow streams at age 88, but up until that point I'm significantly better off collecting earlier. On a present value basis (at the same 2% COLA), I'm better off until age 90. If one sets their money in cash, they might be indifferent, but at any reasonable investment return, early benefits are nearly always better.
Posted by: Pilot210e at 02/23/2010 07:00:11 PM
Lets see. If I receive $12,000/yr at age 62 I would have made $36,000 by the time I reach age 65. At age 65 this payment goes up by 25% or $3000/yr. It will take me 12 years to make up the $36,000 I made by taking it at 62. Now, 65 + 12 = 77 years old. Since the life expectancy of a US male is 75.8, I don't think the odds are in my favor to make up the difference. And this is all assuming that the SS rules will not change and the $ amount will not change. Nope, I am taking it now because it may not be there in 10 years.
Posted by: Vane Lashua at 02/24/2010 12:45:27 PM
The SS benefit is based on "catching up" at age 77 (when you're expected to die). If you take the benefit at 63, put the money in a money market till you're 66, you'll be ahead (monthly benefit x 3 years x interest). The total payout from years 63 to 77 is the same as that from 66 to 77. After 77 is when the $ difference begins to make a difference ... depending on what that first three years in the money market does compared to the accrued monthly benefit after you hit 66.
Posted by: jim at 02/24/2010 03:14:12 PM
Taking early payout at 62 may yield lower monthly benefits, but taking them early has an advantage in that you are getting lower payments of 3 years until you would reach early retirement. I did a calculation for me if I took lower payment at 62 versus higher payments at 65, for me it turned out it took over 7 years from age 65 for the amount of money I received at the lower rate at 62 versus the higher rate at 65 to be the same. I suggest everyone do a calculation. For those who can live on just their other income at 62, I advise take the money, put it in a cd, regardless of rate, spend just the interest and at 65 do a do over as you said and repay the money in the cd account and start collecting the higher social security rate.
Posted by: Gary at 02/24/2010 09:34:42 PM
Yes, it always makes sense to take early benefits. Face it, you don't know when you will die and having the money in your hands early will always be a benefit. The only reason to delay is if you are making a large income and don't plan to stop...
Posted by: Dave at 02/25/2010 01:18:00 PM
Interesting comments. Jim's idea of saving the money in a CD,spending only the interest, and going for the do-over sounds the best unless the rules change by then and it's no longer allowed. Even then, I think retiring earlier is by far the best. I also noticed that most everyone is good at the math concerning the money that could be gained but are making a huge guess on the unknown (X) number of years left and the unknown (Y) healthy years left. The most common mistake is thinking that the last half of your life will be as long as the first half.
Posted by: Pappyg at 03/01/2010 04:01:39 PM
I'm an embarrassed, "I'm entitled" senior, who for far too long has ignored the other side of my brain, which is screaming "who's obligated" if you're entitled. Government's assault on middle class America created a weapon of monetary destruction (WMD) with the signing of social security reform legislation in 1983, that took social security funding from a pay as you go taxing structure ($1 in - $1 out), to a pay in advance taxing scheme ($5 in - $4 out -save extra $ for now retiring 78 million boomers). 25 plus years later, and the SS taxing scheme has turned a 2.5 trillion dollar (that extra tax $ has grown) potential asset into a 2.5 trillion dollar liability, that will have to be paid again plus interest. That's financial water boarding, and my 15 grand children are entitled to something better than an "I'm entitled" grandpa, hiding behind the skirt of a Tokyo Rose PR campaign put forward by AARP. Working middle class Americans are the horse we all ride to our prosperity, and treating them like rented mules, will result in a society that, well acts like rented mules! To this end, a soon to be launched "community based" solution to the issues surrounding social security has been put forward, and If you have a problem being referred to as Im entitled, or if you have an Im entitled member of your family, then discover a way to shed that image at: www.americaretoday.com
Posted by: diane masucci at 03/02/2010 03:57:04 PM
I was forced to take early social security because my unemployment, 6 months , was gone.When I returned to work I earned more than the limit and was paying back monthly. I now had a full time job and a part time position.. Before I stopped the part time position as per discussion with social security, I was terminated from the full time job. Unemployment told me If I quit the part time job of two days a week I would lose unemployment. After 4 months I owe social security a huge chunk of change. I actually worked, earned nothing and now I am filing bankruptcy, lost my home and turn only 65 next month.
Posted by: Dennis at 03/02/2010 07:49:15 PM
Laura - I asked SS to file and suspend and they said if I suspend my payments my spouse will not receive a spousal benefit payment until I actually begin receiving payments. My wife and I have both reached our full retirement ages. She is currently receiving a benefit based on her work history. I have not yet filed. Can you reference a SS document that I could use in discussing the concept with SS? Thanks
Posted by: Mary Beth Franklin at 03/04/2010 08:05:25 PM
Hi, Mary Beth Franklin, retirement editor for Kiplinger's Personal Finance magazine here. Deciding when to take SS benefits is a personal decision. If you're in poor health or need the money as soon as possible, take it early at 62, but be aware that you're retirement benefits will be reduced for the rest of your life. However, if you become entitled to survivor benefits later, you can still collect full retirement benefits--worth 100% of what your higher-earning spouse received during his or her life--if you are at least "normal" retirement age (currently 66) at the time you begin collecting survivor benefits. But if you plan to keep working, delay collecting until your normal retirement age (NRA), or your benefits may be squeeze by the earnings cap. It disappears at your NRA. And if you're concerned about leaving the largest benefit for a surviving spouse, consider delaying collecting benefits up until age 70.
Posted by: Mary Beth Franklin at 03/04/2010 08:09:03 PM
To David Wick, Because you are already beyond your normal retirement age, you can collect SS retirement benefits without worrying about being squeezed by the earnings caps. Collect when you want.
Posted by: Mary Beth Franklin at 03/04/2010 08:11:04 PM
To Marilyn, Yes it is possible for the minor child of a parent who is collect SS retirement benefits to collect up to half of the amount that the parent receives each month up to age 18.
Posted by: Mary Beth Franklin at 03/04/2010 08:14:25 PM
To Nick, You can file Form 521 to cease your current SS benefits. Once you repay all the benefits that you--and any dependents-- have collected on your work record, you can restart your SS benefits based on your current, older age. You pay not interest when you repay your benefits, but it could be a big chunk of change--more than $100,000 in some situations. Still it's cheaper than buying a cost-of-living adjusted annuity to create the same amount of additional monthly income, but you usually have to live at least eight to 10 years beyond the repayment to break even before you enjoy the benefits of your investment. See our story "Secret Ways to Boost Your Social Securit"y from July 2008.
Posted by: Mary Beth Franklin at 03/04/2010 08:17:03 PM
To Cleve, Yes, you and your spouse can both collect "full" Social Security benefits if you wait until your normal retirement age (currently 66) to retirement. You can each collect benefits on your own work record, or if your wife's own benefit is smaller than half of your benefit, she could collect a spousal benefit equal to half of what you receive. The above article offer strategies for married couples to maximize their SS benefits.
Posted by: John Midbo at 03/10/2010 08:24:00 PM
The government really needs to relax the earnings cap on those who choose to retire at 62. Remember that those who are between 62 and 65 still have to purchase individual health coverage (assuming it's not provided by our previous employer) - and that's certainly not cheap, as the folks out in California are learning! I'm a little surprised that AARP hasn't lobbied for change in this area. One solution I've considered is asking my employer to drop me to minimum wage, and pay the entirety of my health insurance premiums - thus allowing me to keep working, collect Social Security, and have health coverage.
Posted by: Carolyn carrell at 04/22/2010 07:25:15 PM
I need to know if I become disable & I need to get my disability would they base his income to my income?
Posted by: Eric at 05/03/2010 07:42:55 PM
I know you can claim and suspend benefits to allow a spouse to collect on your record. Does this strategy also apply to collecting benefits for minor children and spouse caring for said children??
Posted by: rose m. at 05/16/2010 12:06:37 PM
i'm now recieving ss age 63 i was told i could have not filed on mine but my husbands as a spouse he's recieving ss too..if that is true why didn't ss tell me i could have drawn a spousal befit until i was ready to file at 66?
Posted by: Coffeecup at 06/06/2010 09:36:49 PM
Having been married for 25 years and over 62, with an ex-spouse who died without remarrying, could someone elaborate on the statement: If your ex-spouse dies, you're entitled to a monthly survivor benefit (even if he or she remarried) equal to 100% of what your ex received during his or her lifetime -- assuming it's higher than your benefit.
Posted by: candy at 06/30/2010 11:14:52 PM
I understand that at 62 I could draw 1/2 of my husbands retirement. He retired early at 62. Does that change that? Also, when I draw my 1/2 does that reduce his 2500 to half. If so doesn't that hurt him to help me?
Posted by: candy at 06/30/2010 11:16:03 PM
A lady at social security told me that I can file for an appeal on my disability claim and file for my social security benefits at the same time. Is that right?
Posted by: Hillman at 07/14/2010 12:33:03 PM
Question? I'm 65 and have been collecting SS since age 63. I was told that If I was to pay back what I have received from SS. I could collect half of my husbands SS without him getting any reduction until I reached age 70. After age 70 I could collect that full amount. Is this true?
Posted by: michael at 08/01/2010 11:41:24 AM
So I am 50. Here is what I am thinking. If I collect SS at 62 I get $1695pm if I wait till 67 I get $2487pm a $792pm difference. In the 5 years betwen 62 and 67 I will have collected about $101,700. If I pay it back it will be about 10.7 years before I start get the net benefit of the larger monthly payout. I will then be 78years old. If alternitivly I take the 101,700 and put it into some instument or accont that gives me 4% I can take out about $425pm for 20 years (or till I am 87). This is all calculated not considering peresnt value. The net net for me seems to be take the SS early at 62 and dont pay it back but keep the 101,700 and invest it, I will have the lump sum if I need it or it will be availble to my heirs if I die early. Yes? No?
Posted by: jack sutton at 08/09/2010 08:20:21 AM
Am not cler on this "reset" clause. Say you have to pay back $100,000.00 how is it re-payed? All at once or over time. There is no way that I could pay that sum back just to get a $1000.00 higher benefit check. What am I not understanding?
Posted by: Davi at 08/13/2010 08:53:24 PM
Can 80 years old who retired and collected SSN at age 62 pay back and collect from age 70? or is it starting at age 80 ?
Posted by: Sandra at 08/13/2010 09:55:25 PM
I'm currently 61 and taking care of my soon to be 90 yr. old mother with dementia If i take s.s at 62 I'll get 800.00 a month and if my mother dies I couldn't live on that at 65 I'll get 1235.00 and at 70 1735.00. This change sure doesn't mkae things easy.
Posted by: John at 09/02/2010 05:57:29 PM
Can someone, age 84, collect two checks from SS - one from her own earnings and one from her deceased ex-husband? They were married for more than 10 years.
Posted by: frances at 09/28/2010 12:17:19 PM
I am 66 and still working and receiving ss check. I will bwcome self employed soon. Will I have to pay social security on those earnings?