Maximizing Social Security Benefits

By Sandy Botkin

Maximizing social security benefits isn't as easy as you may think. In order to accomplish this, you need to navigate the byzantine rules in order to figure out when to start receiving social security benefits; after all, you can start taking it anywhere between ages 62 and 70. Spouses normally can get 50% of the full retirement benefits, which can also be taken between 62 and 70. There are even survivor's benefits.

Government publications on all this are not very clear. Let's face it; it's not in the interest of the government to have all Americans maximize their benefits. Thus, I'd like to discuss some of the rules that deal with spousal benefits, which could apply to just about everyone in the country.

Essentially, the amount of spousal benefit you're entitled to is based on when you, the spouse, initiate it. However, the working spouse MUST either currently be receiving benefits or have "filed for the benefits but suspended these benefits." File and suspending allows one spouse to file for benefits at full retirement age then suspend the payments until age 70 when they will get the maximum amount each month from the government. The longer the spouse waits to receive spousal benefits, the greater the monthly amount. Conversely, the earlier they start receiving the benefits, the less they get.

Currently married spouses who are claiming spousal benefits or who have filed for benefits but chose to suspend them can start receiving spousal benefits earlier than age 66 and still get the higher of their own benefits based on their own work record or the spousal benefits later on. This might actually result in the overall greatest amount of income for the couple over their lifetime - this way the couple starts an income stream at age 62 while the higher earning spouse will maximize their own benefits by waiting till age 70. If your age is within 4 years of your spouse, you should definitely consider having the older spouse file for benefits but having them suspended so that the other spouse can start receiving spousal benefits.

Even former spouses can get benefits based on the former spouse's work record IF:

* the receiving spouse (the one filing for benefits) is unmarried.
* the marriage lasted at least 10 years.
* you have been divorced for at least 2 years.
* you and your former spouse are age 62 or older and your former spouse is entitled to benefits.

Even better, your former spouse won't even know that you have filed for benefits. However, for divorced spouses, if you initiate spousal benefits before your full retirement age, you are no longer eligible to receive the potentially higher benefits based on your own work record. Thus you might want to wait until full retirement age if you can afford to do so.

If you are a divorced spouse trying to elect benefits based on your ex-spouse's earnings, don't elect spousal benefits before age 66 (for baby boomers) if you will potentially earn more based on your own work record.

What we didn't know when we wrote the book, Achieve Financial Freedom – Big Time! was that taking a spousal benefit before full retirement age, which is age 66 for baby boomers, will reduce the spousal benefit. Here is a handy chart showing what you will get if you take the benefits before age 66:

Age 62-- you get 35% of the higher spouse's benefit
Age 63-- you get 37.5% of the higher spouse's benefit
Age 64-- you get 41.7% of the higher spouse's benefit
Age 65-- you get 45.8% of the higher spouse's benefit
Age 66-- you get 50% of the higher spouse's benefit

The key here is that either your spouse has initiated benefits and suspended them or is currently getting benefits. Thus, if you haven't worked most of your life in order to have a substantial benefit on your own, waiting until age 66 would produce more money in the long term. Hopefully this article will lead you to make the right choices and raise questions when you meet with someone at Social Security.