Maximize Your Social Security Benefits With Tailored Strategies

In survey after survey, retirees say their No. 1 worry is that they’ll run out of money.

Recently, I polled my radio show listeners in the Palm Beach, Fla., area, and 86% said it’s their biggest financial concern.

The transition over the past few decades from traditional pensions to defined contribution plans has moved the responsibility of retirement saving and investing from employers to individuals. And it’s been a challenge, to say the least.

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That’s why now, more than ever, it’s important for retirees to maximize their Social Security benefits. It’s a guaranteed income stream that you’ve earned through your years of hard work.

Social Security is generally considered to be free from risk, as federal legislation known as the Social Security Guarantee Initiative Legislation, adopted in March 1999, establishes that anything that has to be done to keep Social Security will be done for this generation of Americans.

There are hundreds of Social Security claiming strategies

But you have to know how and when to take Social Security to maximize your benefits. Most people are amazed to learn there are more than 500 different claiming strategies and more than 2,000 governing rules. There are strategies for:

• married couples
• divorced couples
• domestic partnerships
• widows and widowers

Some are simple and straightforward, and some can be complicated and include multiple steps.

While the Bipartisan Budget Act of 2015 restricted the use of some Social Security claiming techniques (including the “file and suspend” method that was so popular with traditional married couples, especially when the husband made substantially more income than his wife), I tell my clients it’s like the old Alexander Graham Bell quote: “When one door closes, another opens.”

There are still many opportunities available to enhance your retirement security. But it helps to work with a financial professional who concentrates on creating income in retirement to help find a strategy — or combination of strategies — that will work for you.

How filing for benefits early paid off for one of my clients

For example, I have a client named John who was downsized from an executive position when he was 60 years old. Try as he might, he couldn’t find a job with a similar level of compensation, and he told me he was considering filing for Social Security as soon as he turned 62.

I’m sure he expected a lecture. Instead, I asked him, “Have you thought about filing at 60?”

I remembered that John, who was divorced, had been married for 17 years to a highly compensated dentist. She died of breast cancer and had never filed for Social Security, but he could file on her record as a surviving divorced spouse because their marriage lasted more than 10 years. Then he could switch to his own retirement benefit sometime after he turned 62.

A creative way to manage the Social Security earnings test

The only hiccup was that John would be limited in how much he could earn in the job he’d gotten in a cabinet-making shop. If he went over the annual limit (for 2017, that limit is $16,920), the government would deduct $1 for every $2 he was over.

So John negotiated with his new employer to separate his regular compensation ($300 a week for services he performed in the store) from the money he made in sales (for which he set up an S corporation, so it was considered the profit from his own business, not regular wages).

Now John’s own benefits are still growing, but his ex-wife’s benefits are helping him maintain a comfortable lifestyle.

It all comes down to your unique set of circumstances

Of course, John didn’t, and still doesn’t, know the 500-plus strategies for taking Social Security benefits – and frankly, neither do I.

But I do know that pretty much every single person I see has a unique situation that requires considerable research and coordination to maximize what he or she has coming. It’s all part of the comprehensive planning that a financial professional could be and should be offering you.

Retirement planning isn’t just about stocks and bonds and how much income you can derive from your portfolio. It’s about cash flow – and that means all your potential income streams.

There’s a misconception out there that Social Security is just for people who don’t have any other money to live on in retirement. But that’s not true. It’s the solid foundation for many retirees’ financial plans. According to the Social Security Administration, it’s the major source of income for most retirees.

Social Security is something every worker has earned – and everyone deserves to make the most of it that they can.

Kim Franke-Folstad contributed to this article.

Disclosure: John Convery is an Investment Advisor Representative of Retirement Wealth Advisors Inc. (RWA), an SEC Registered Investment Advisor. The Educated Wealth Center, RWA and Kiplinger are not affiliated.