For most Americans, Social Security retirement benefits typically represent 30 to 60 percent of their retirement income and, yet, according to the National Social Security Association,,LLC, more than 90 percent of Social Security recipients receive less money than they are entitled to. For many filers, this can represent tens of thousands, or even hundreds of thousands, of dollars in lost retirement benefits.
The Virginia Society of Certified Public Accountants (VSCPA) offers these tips to help you not leave money on the table:
- Defer Benefits to Age 70 — By delaying receipt of benefits from age 62 to 70, you will increase you retirement income payment by 76 percent plus any cost of living adjustments (COLA).
- The Do-Over — If you’ve already filed for benefits and wish to undo your election, you can do so up to 12 months from the date you filed.
- Start-Stop-Start — If you elected early (age 62), and later decide to defer your Social Security income benefits, you can suspend your benefits as early as age 66. This will allow your benefits to increase by 8 percent per year (known as delayed retirement credits or DRC) to age 70, resulting in a 32-percent increase.
- Increase Your Benefits While Receiving Your Benefits — Your benefits are based on your highest 35 years of averaged indexed monthly earnings. If you continue to work while receiving benefits and your earnings are higher than any of the previous 35 years of indexed earnings, your benefits will be re-calculated to reflect your higher current earnings.
- File and Suspend — Once you reach full retirement age (FRA), you can elect to “file and suspend” your benefits, allowing your benefit to grow by 8 percent per year, plus COLA to age 70. Since you have technically filed for benefits, although not receiving them, your spouse will now be eligible to file for spousal benefits at her FRA.
- File and Restrict — If your spouse had filed for his/her benefits (and you had reached FRA) you could restrict your benefit to a spousal benefit and collect 50 percent of the spouse’s benefit amount. Then you could defer taking your own benefit until age 70 in order to earn DRC plus COLA on your benefits. At age 70, you would switch to your now much-higher benefits.
- Spousal Benefits — If you get married, you are eligible for spousal benefits once you have been married for at least one year. At FRA, spousal benefits are equal to 50 percent of your spouse’s FRA benefit.
- Survivor Benefits —Once you have been married for at least nine months, you will be eligible for survivor benefits. Once you and your spouse reach FRA, survivor benefits will be 100 percent of the deceased spouse’s benefit amount, including any DRC’s. Survivor benefits are available as early as age 60 (or 50 if you are disabled) at a reduced amount.
- Divorced Spouse Benefits — If you were married for 10 years or longer, divorced for at least two years, not remarried and you and your ex-spouse are at least age 62, then you will be eligible for ex-spousal benefits, which are similar to benefits you would have received if you were still married.
- Divorced Spouse Remarries — If you are divorced and then remarry, you will no longer be eligible for benefits off of your ex-spouse. However, if you remarry after age 60 and your ex-spouse is deceased, you are eligible for ex-spousal survivor benefits even though you had remarried (assuming the criteria noted in No. 9 have also been met).
“Clearly, the rules governing Social Security income maximization planning are quite complex,” says Ash Ahluwalia, president of National Social Security Partner, LLC. “In addition to the numerous rules and filing options, one should also take into account one’s health status, life expectancy, income needs, how long you plan to work and survivor needs.”
“Your Social Security filing election may be the most important financial decision you make in planning for retirement,” adds Perelman. “If you’re approaching retirement, perhaps now is the time to take a closer look at all of the numerous and valuable benefits that Social Security has to offer.”
Your local CPA can help you understand your money management issues. Be sure to contact him or her with all of your financial questions and concerns.