Financial Abundance Guide

In the November 17th Wall Street Journal, Glenn Ruffenach has an excellent article entitled “The Baby Boomer’s Guide to Social Security.” In the article, he describes a little known plan for two earner baby boom couples to maximize their Social Security benefits. In this entry, I will describe the seldom used tactic and add another twist that Glenn does not cover in his article.

In my scenario, George is age 66 (his full retirement age) and has not yet filed for his Social Security benefits. He is planning on waiting until he is age 70 to file for Social Security, so he will receive “delayed retirement credits” that provide him with 132% of his full Social Security retirement benefit ($2,000 per month) for a total of $2,640 per month.

George’s wife, Barbara, has recently turned 62 and would like to start collecting her Social Security, which would also be $2,000 per month at her full retirement age of 66. Since Barbara is only 62, she will receive 75% of her full retirement benefit or $1,500 per month.

What George found out by reading Glenn Ruffenach’s WSJ article is that he may file for a spousal benefit at age 66 and receive 1/2 of Barbara’s full projected Social Security benefit or $1,000 per month. This allows George and Barbara to jointly receive $2,500 per month, until George turns 70.

When George turns 70, he will apply for Social Security benefits based on his earnings and begin to receive his delayed retirement benefit of $2,640. Thus, when George turns 70, the couple’s Social security benefit will increase from $2,500 per month to $4,140 per month.

The final advantage to this approach occurs if George dies before Barbara, a likely scenario since he is four years older and a male. If this occurs, Barbara may apply for “survivor benefits” and receive George’s full benefit of $2,640 per month instead of her $1,500 per month, for the rest of her life.

Assuming both George and Barbara live until they are age 80, by using this approach, they will receive $59,520 more in Social security benefits than if George had merely filed for his full benefit at age 66.

All of these numbers assume no inflation. On an inflation adjusted basis, the increases in the amount of additional Social Security collected would be even greater.

The above example does not mean that this is the best approach for you. It is only meant to demonstrate that Social Security is a very complex system and the decisions that you make on when and how to receive your benefits can have a major impact on the income that you will receive. Be sure to get expert advice on the vagaries of the system before you make your decision on when and how to take your Social Security benefits.