Making the most of Social Security benefits

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3 ways to boost Social Security
By Jean Chatzky

If you use the calculator on the Social Security Administration's website to determine your projected Social Security benefits during retirement, you'll get three data points: the monthly amount you can expect to receive at your full retirement age, the larger monthly figure you'd get if you delay drawing benefits until age 70 and the sum you can collect at age 62, the earliest age at which you can begin collecting a check.

The calculation becomes more complex if you consider receiving your current or former spouse's Social Security benefits instead of your own. The Social Security website provides some basic information about that as well.

But you'd be hard-pressed to find the optimal strategy, one that takes into consideration all your options, on the government site. The way to get the best deal from Social Security requires careful computer calculations.

Maximizing benefits

At least a half-dozen computer programs -- some free and some available for a small fee -- will analyze your numbers and come up with the strategy that provides the most return for your situation based on your earnings history.

Consider this illustration of why sophisticated analysis is important.

JoAnn was married for 20 years. During that time, she worked for a few years as a teacher and wasn't eligible to pay into Social Security because her employer had its own pension system. Then she quit, stayed home and took care of her son. When he was 5 years old, she and her husband divorced. For the last 15 years, she's worked in the marketing departments of a succession of companies and earned a good living. But because she got a slow start, her Social Security isn't as high as it might have been if she contributed steadily to the program. She's now almost 62 and wondering what to do next.

I took JoAnn's age and the amount Social Security says it will pay her at her full retirement age -- 66 -- and plugged them into the calculator on the Social Security Income Planner website. It was assumed that she and her ex-husband would die at 85 -- about what Social Security's actuaries predict.

Here's how much Social Security the Social Security Income Planner calculates she would receive in three different scenarios:

  • Her own benefit at ages 62 to 85: $568,955.
  • Her own benefit at full retirement age to age 85: $642,436.
  • Spousal benefit (half of her ex's) at 66 and then her own at ages 70 to 85: $760,272.

That's a $117,836 difference between scenario No. 2 and No. 3, and a whopping $191,317 difference between scenario No. 1 and No. 3.

Another analysis

When I ran my own numbers as well as those of my husband through the Social Security Income Planner, the program provided eight possible scenarios ranging from both of us filing right now to both of us delaying until age 70.

The most financially advantageous option, the program concluded, was for my husband to file a claim -- and then suspend his benefits -- at 67, when I'll be 62. That will allow me to claim spousal benefits while his benefits continue to grow until he's age 70. That way, by the time both of us reach 85, we'll have collected $1,543,156. That is $256,290 more than we would receive if we both claimed when we turned 62 and lived to 85.


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