Don't Gamble on Social Security

Want to take the guesswork out of one of the most important decisions affecting your financial security in retirement? We can help.

Kiplinger's is joining with Social Security Solutions Inc. to offer a tool to uncover the most advantageous time to start collecting your Social Security benefits. The goal is to maximize the amount you'll receive from the program over your lifetime. Whether you are single, married, divorced or widowed, Kiplinger's Social Security Solutions can show you how to add tens or even hundreds of thousands of dollars to your lifetime benefits, according to William Meyer, founder of Social Security Solutions.

Meyer has spent his career -- including stints with Charles Schwab and H&R Block -- developing financial services for "real people." Working with William Reichenstein, a professor of finance at Baylor University, Meyer devoted four years to creating the methodology and technology at the heart of the tool.

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A complex puzzle. The decision of when to claim benefits can be maddeningly complex. You can start collecting as early as 62, as millions do, even though that means accepting 25% less each month than if you waited until full retirement age (FRA) -- 66 for those born between 1943 and 1954. If you wait past 66, you're awarded an 8% delayed-retirement credit for each year up to age 70. Dodging the penalty and piling on the bonus means benefits at age 70 are 76% more than at age 62.

Whether a higher benefit at the later age is worth the wait depends, of course, on an unknowable: how long you'll live. Meyer and Reichenstein's research shows, for example, that for a single person who dies at age 80, it makes little difference whether benefits start at 62, 70 or any age in between. But for almost anyone who lives past 80, waiting until age 70 will pay off in increased lifetime benefits.

The decision is more complicated for married couples because they can mix and match benefits and employ potentially valuable strategies unavailable to singles. There are additional twists and turns for widows, widowers and divorcees, too. Kiplinger's Social Security Solutions online tool crunches the numbers to unravel some 500,000 permutations and develop a personalized recommendation for your particular circumstances.

A real-life example. Knight Kiplinger, editor in chief of this publication, thought he knew the best strategy for his family: He and his wife, Ann, should each wait to claim benefits until age 70. "For people struggling to get by, it makes sense to claim early," Kiplinger notes. "But for those who can afford to do so, I always thought waiting as long as possible is the best strategy."

But the new software tells him otherwise. It recommends that Ann (who is slightly older and has earned a smaller benefit than Knight has over her career as a teacher) take her benefits as soon as she turns 66 -- never mind missing out on the delayed-retirement credits. Knight should claim at 66, too, but immediately suspend his claim. That would make Ann eligible for a spousal benefit that, when added to her own, will equal half of Knight's benefit. That will immediately boost her monthly benefit. At age 70, Knight should start collecting his benefit, which will then be supercharged by 32%, thanks to delayed-retirement credits.

The result: Over their expected lifetimes, Knight and Ann could receive about $165,000 more than if they both claimed benefits at age 62 -- and about $55,000 more than if they waited until age 70. The report also shows how their benefits would differ if they lived longer (or died sooner) than the life expectancies they used as estimates for the initial calculations.

"It was an eye-opener," says Kiplinger. "My instinct -- for both Ann and me to wait as long as possible -- would have been a mistake."

Visit www.kiplinger.socialsecuritysolutions.com for details on how to get your personalized recommendation. You can choose a do-it-yourself version for $49.95, or use the tool with telephone guidance from a Social Security expert for $124.95.