- Posted November 4, 2015 by
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3 Smart Social Security Strategies for Retiring Boomers
“Over the next 15 years there will be 10,000 boomers turning retirement age every day, but many don’t know about the legal strategies allowed by the SSA to maximize their benefits,” according to retirement income planning and Social Security maximization specialist Craig North, president of Missouri Retirement Specialist LLC, based in St. Charles County, MO.
In fact, U.S. retirees have left billions of dollars in Social Security benefits on the table because they retired at the wrong time and were unaware of three specific filing strategies. A new budget bill passed by Congress in October will change these strategies over the years to come, so now is the time for retirees who are age 62 or older in 2015 to take advantage of them.
Considering that the Employee Benefit Research Institute [EBRI] estimates that 43% of boomers are unprepared to fully support themselves in retirement and would run through their savings within 20 years, maximization of Social Security benefits remains a key element in boomers’ retirement planning efforts.
The Social Security Administration’s official website notes that a retiree’s maximum benefit depends on the age of retirement. A person who retires at the full retirement age of 66 in 2015, for example, may claim a maximum monthly benefit of $2,663. But if that same person chooses to retire at 62, the maximum benefit would be only $2,025 – while waiting to retire until age 70 would result in a maximum benefit of $3,501.
Beyond those age-based benefits, however, three further strategies can help individuals and couples make the most of Social Security if they act quickly. Here are the three smart Social Security filing strategies for boomers headed into retirement:
1) File and suspend. Using a file-and-suspend strategy can help qualified couples raise their Social Security payments by combining spousal benefits with the SSA’s system of delayed retirement credits. For Barney and Betty, for example, a couple who are both 66 years old, Barney can file for his full retirement benefit of $2,000 even though he plans to work until 70 and then immediately suspend his own benefit payment. Because Barney has filed, Betty can retire at age 66 and receive payments based on Barney’s Social Security benefits.
2) Spousal benefits. At the same time that Barney files and suspends, Betty files a restricted application with the Social Security Administration. Combining file-and-suspend with a restricted application thus activates Betty’s eligibility to apply for a spousal benefit of up to one-half of Barney’s retirement benefit, or $1,000. Barney and Betty now have an extra $12,000 annually until he retires at age 70 and she also reaches 70, when she files for her own full retirement benefits.
3) Delayed retirement credits. Because they have waited to receive benefits until age 70, both Barney and Betty are accruing delayed retirement credits. These credits from the SSA keep growing at a rate of 8% for each year that a retiree delays receiving benefits.
Because of the low interest rate environment over the past few years, the SSA’s 8% annual increases for retirees who wait to start their benefits can be significant, North said.
“Delayed retirement credits usually amount to hundreds of thousands of dollars over an average couple’s lifetime,” he said. “As traditional pensions have gone away, Social Security often becomes the foundation of retirement. It’s guaranteed, inflation adjusted and tax preferred, advice recently given to a couple who were showed how they would receive an additional $259,000 over their lifetimes by using the strategies that Social Security has put into place.”