get what’s yours: social security q&a with co-author dr ......ip moeller of get what’s...
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B O N N E R & P A R T N E R S I N V E S T O R N E T W O R K
Get What’s Yours: Social Security
Q&A with Co-Author Dr. Larry Kotlikoff
SPECIAL REPORT 2015
Get What’s Yours: Social Security Q&A with Co-Author Dr. Larry Kotlikoff
Amber Mason: Hi, all, thanks so
much for joining us. We’re going to go
ahead and get started with tonight’s
webinar. My name is Amber Lee Ma-
son. I’m the managing director here
at Bonner & Partners, and I’m here
tonight with Dr. Laurence Kotlikoff,
co-author with Paul Solman and Phil-
ip Moeller of Get What’s Yours: The
Secrets to Maxing Out Your Social Se-
curity. Larry, thank you so much for
being here.
Larry Kotlikoff: Great pleasure to be
with you, Amber.
AM: We’re going to get started in just
a second here, but first I want to make
sure everyone knows how this works.
You can submit a question via the or-
ange “Ask a Question” button. I have
a handful of questions folks submit-
ted beforehand; we’ll get started with
those, but if you have a question to
ask, go ahead and send it along to us,
and if you run into any technical trou-
bles, there’s a link right there at the
bottom of your page. The fine folks at
WordCast are on hand to help you out
personally. We’re also recording this
webinar and will post it on the Bon-
ner & Partners website just as soon
as we can. We don’t have much time,
so let’s get started. We’re going to be-
gin with a question from Robert from
Coralville, Iowa; he says, “I currently
have private disability insurance. So-
cial Security denied me because I had
my own business for 5 of the last 10
years, so I only have 18 of 20 needed
credits. I’m 60 years old. Would it be
beneficial to hire an attorney and ap-
peal my case?”
LK: Yeah, I don’t know – I don’t have
enough experience with trying to ap-
peal decisions by Social Security. I
really couldn’t give an informed judg-
ment on that one way or the other.
I’m not sure if you talk to an attorney,
they’ll say, definitely hire me, but I
would try and talk to someone who
has more experience with these kind
of appeals who’s not personally vest-
ed in the answer.
AM: Yeah, good advice. We’ll move
on to Edward from Bradenton, Florida.
He says, “I’m 86, single, and receive a
Social Security check in the amount of
$2,080. My health is good with no dis-
abilities. What options do I have for
increasing my monthly amount?”
LK: There’s no way, unfortunately,
unless you want to keep working; if
you earned above the ceiling for sure
you would raise your annual benefit;
if you can find a job at 86 that pays a
lot, you will definitely be able to raise
your benefits. Apart from that, the
only thing you could do is find some-
one to marry who had a very high ben-
efit that was larger than your check
and stay married to that person for
nine months, and then if the person
dies, you’ll be able to collect a widow-
er’s benefit, a widower’s benefit equal
to that person’s check, so that’s the
only other strategy I can think of for
potentially raising your monthly in-
come from Social Security.
AM: All right, Edward, you should be
out there looking for true love. Lin-
da, from New York, New York, asks,
“What if you’re divorced? Is there no
way to share in your husband’s Social
Security?”
LK: You absolutely can if you wait till
full retirement age and file just for
your divorcé spousal benefit; assum-
ing you were married for 10 or more
years, then you’ll get half of your ex’s
full retirement benefit, assuming your
ex is over 62 and you’ve been divorced
for two years. Let’s say you’re now 58
and your ex is roughly the same age.
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You make it to full retirement age,
about 56.5; you can file just for your
divorcée spousal benefit, get half of
his benefit, half of his full retirement
benefit. Regardless of when he takes
his benefit, you’ll get half of his full
retirement benefit and then if he
passes away, you’ll get a divorcé wid-
ow benefit, which will be potentially
exactly equal to the check he was get-
ting. This does not deprive him of any
benefits or take away from any bene-
fits of his current wife, if he’s remar-
ried, or his kids are going to get. It’s
independent of that.
AM: We had another question along
these lines from Robert from Taos,
New Mexico. He asks, “[At] what age
can you apply for your ex-spouse’s
Social Security benefits? Do you have
to wait till retirement age or can you
apply sooner?”
LK: That’s a very good question. You
can formally apply starting at age
62 for a divorcé spousal benefit or a
spouse benefit if you’re married. The
problem is that if you get that divorcé
spousal benefit, they will also force
you to take your retirement bene-
fit early, and then they’ll give you,
roughly speaking, the larger of the
two benefits. You’re retirement bene-
fit will likely, if you had a decent earn-
ings history or previous spousal ben-
efit and therefore you wipe out your
spouse benefit because you eviscerate
your retirement benefit, and it will be
reduced permanently. That’s called
deeming. They will deem you, if you
file just for your spousal benefit, to be
also filing for your retirement benefit,
if you do all this before full retirement
age. Once you hit full retirement age,
you can file just for your spousal ben-
efit and wait till 70 to collect your own
retirement benefit when it will be ac-
tually 76 percent higher than it would
be at 62, adjusted for inflation.
The best strategy if you’re divorced
and you were married for 10 or more
years, would be to wait till full retire-
ment age and then just take your di-
vorcé spousal benefit and then at 70
take your own retirement benefit and
if it’s larger than your divorcé spousal
benefit, you’ll get a bigger check [Break
in audio] your retirement benefit. This
all depends on your maximum age of
life. If you’re for sure, absolutely for
sure, going to die at 72, for example,
you wouldn’t want to wait this long
to start taking something from Social
Security. What I’m talking about is for
somebody who has a very high max-
imum age of life, like 100, and they
want people to advert old age, and we
have to worry about that outcome –
that’s kind of the worst-case scenario
in terms of our finances is living to our
maximum age of life and that could
be, if it is 100, that means paying for
yourself all those years and there are
people who actually are going to live
in retirement for more years than they
worked.
One has to be very careful and make
sure that you don’t take your retire-
ment benefits too early, because it’ll
be a lot lower and then for years and
years and years you’ll be collecting a
check that’s much, much smaller than
it would otherwise have been.
AM: My mother fell into this trap her-
self. The argument that she got from
Social Security when she spoke to
them was the break-even argument,
which you discuss a little bit in your
book. They showed it in there; if she
took her benefit early versus if she
took her benefit later and it was larger
and they told her how long it would
take for her to essentially break even
on that decision, and with those num-
bers, it looked like a good idea to her
to take her benefit early, but you’ve
argued that that kind of analysis
doesn’t work for everybody. Can you
talk a little bit about that?
LK: It doesn’t work for anybody. It’s
really 100 percent the wrong type of
analysis because Social Security is
providing longevity insurance, and
when we think about buying insur-
ance, we don’t think about that on a
break-even basis. For example, when
we think about buying a homeowner’s
policy, we don’t think about when we
break even on this policy. If we do,
we would never buy the homeown-
er’s policy, because we know that
the expected payoff from our house
burning down is much less than the
premiums that we have to pay. No,
we don’t think of it that way because
we can’t play the averages. We only
have one house that will or will not
burn down, and if it does burn down,
we want to have full coverage. If you
buy car insurance, we want to be fully
covered for totaling a car and hurting
somebody very badly. If we buy health
insurance, we want to be covered for
the most expensive operation that we
may have to have. Here, the worst-
case scenario is that we live to a max-
imum age of life.
Focusing on our expected age of life
is dead wrong, and that’s what Social
Security has been leading people to do
and that’s what they did to your mom
that was a great disservice. I wrote
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a column that actually came out yes-
terday in PBS NewsHour – if you go to
http://www.pbsnewshour.org and you
click on Economy and then you click
on Social Security, you’ll see my week-
ly column – which said Social Security
take down your… basically stop tell-
ing people to focus on life expectancy
because that’s not relevant. You can’t
count on dying on time. You have to
assume the worst-case scenario and
cover yourself for that situation. The
real risk in life is not dying, because if
you die you get to go to Heaven; you
don’t need money. The real risk is that
you’ll live to your maximum age of life.
Let me just say one other thing, which
is, Amber, how old is your mom?
AM: She is 69.
LK: Sixty-nine. Okay, had we spoken
a couple of years ago, even right now
she could – if you take your retirement
benefit early, let’s say at 62, you have
an option at full retirement age, which
for your mom was 66, to suspend your
retirement benefit and start it up again
at 70 and it will be 32 percent higher
than the level at which you suspended
it, above and beyond any adjustment
for inflation.
AM: If you’d taken your Social Secu-
rity early and you think it’s a mistake,
you still have a chance to fix part of
that mistake, anyway, when you reach
full retirement age: Is that what you’re
saying?
LK: Exactly, you have a window be-
tween full retirement and 70 to sus-
pend your benefit and start it up again.
A lot of people go to Social Security
and say I’d like to do this and the Social
Security agents, they don’t just make
the mistake that they made in counsel-
ing your mom, they make all kinds of
mistakes. I would say 40 percent of the
answers that Social Security folks are
giving people are either dead wrong,
mostly wrong, or just completely par-
tial information. A lot of people are
being told that they can’t suspend
their benefits, which it’s absolutely
crystal clear that they can, and if they
just go to a different office or speak to
a different person, they will be able to
collect – to suspend their benefits and
start them up again at 70. Our book Get
What’s Yours: The Secrets to Maxing
Out Your Social Security is very clear
as to what you can do. That’s why it’s
important to get ahold of this book, I
think, to really understand the general
parameters.
The book for many people will tell you
exactly what to do or give you an idea
at least. We’re not financial advisers,
so this is an educational guide, that’s
what the book is. I also have a software
company that has a program called
https://www.maximizemysocialsecu-
rity.com, and for more complicated
cases, the program – it only costs $40
and it will calculate really what’s go-
ing to maximize your lifetime benefits,
what’s the optimal strategy.
AM: We’ll make sure to remind people
of that link when we get to the end of
the Q&A, but I do think it illustrates
how important it is to get educated and
get informed before you go to Social
Security because they might not neces-
sarily be able to answer your questions,
as Larry said, accurately. We do have a
couple more questions here before we
get to some of the live questions. Ro-
saria from Huntington, Utah, wrote in
to ask, “Can I still work part time while
collecting Social Security?”
LK: Once you reach full retirement
age, the minute you reach full retire-
ment age, on your birthday – right now
the full retirement age is 66, so those
hitting their 66th birthday, the earn-
ings test ends. You can earn as much
money as you want and still collect
your retirement benefit or your spousal
benefit or your widow benefit without
any earnings test being applied. Before
that, between 62 and December 31 the
year before you reach your full retire-
ment year, there’s an earnings test,
which is taking 50 cents on the dollar
away from your benefit if you earn more
than about $15,000 right now and then
between January 1 and the day you
reach 66, reach full retirement age in
that year, there’s a different earnings
test, which has a higher ceiling, more
around $30,000and you lose about $1
for every $3 you earn, so the earnings
test is age-specific. The other thing –
two other very important things to say
about the earnings test, which is if you
lose benefits under the earnings test,
they will increase those benefits when
you hit full retirement age.
They will adjust the benefit upward –
and I’m talking about your retirement
benefit. If you lose some of your retire-
ment benefit, they will increase it due
to what’s called the adjustment reduc-
tion factor. The earnings test for many
people is not actually hurting you. You
lose some benefits for a bit, but then
you get higher benefits once you get to
full retirement age, but for other peo-
ple you can lose some benefit, hit full
retirement age, and then eventually
flip on to a different benefit. For ex-
ample, you might flip on to start tak-
ing your widow’s benefit and they may
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have raised your retirement benefit,
but if your widow’s benefit is higher,
it won’t help you. For some people the
earnings test is really a test – is really
a tax on your benefits. For other peo-
ple it is not. Again, the proper software
can figure this out for you in no time,
but it’s not something you necessarily
understand fully on your own. Some-
times you need a computer to run all
the cases and think through all these
issues.
AM: You did mention the widower’s
benefits. We had from Bill from West
University Place, Texas, write in to say,
“It’s 15 years since my wife of 30-plus
years died, but I’ve done nothing to
gain some benefit from her Social Se-
curity account. It is too late, and where
would I start?”
LK: How old is this gentleman? Amber,
do you have any idea?
AM: We don’t have a note from Bill on
how old he is, but let’s say he’s full re-
tirement age.
LK: He can file for his widower’s bene-
fit. If he hasn’t filed for his retirement
benefit, he could file just for his wid-
ower’s benefit and then at 70 take his
retirement benefit. If he’s already filed
for his retirement benefit, then he gets
hit by this, one of Social Security’s rule
of __________, which is that once you file
for your retirement benefit, if you take
another benefit, a spousal benefit or
divorcé spousal benefit or a widower’s
benefit or a divorcé widower’s bene-
fit, you will be given just the larger of
the two benefits. Because if he was a
higher earner than his wife, he won’t
get anything more. It really very much
depends on his age and what he’s done
so far in terms of whether or not he’s
started to take his own retirement ben-
efit. The best-case scenario would be
he’s 60. He could take a reduced wid-
ower’s benefit and then at 70 take his
own retirement benefit.
This presumes that his own retirement
benefit is larger than his widower’s
benefit or certainly his own retirement
benefit at 70, which is going to be at
the highest-level retirement benefit
that he can get, is larger than his wid-
ower’s benefits, then that would be the
optimal thing to do. If it were the oth-
er way around, the deceased wife was
the higher earner, then taking his own
retirement benefit early at 62 for a cou-
ple years and then flipping on to taking
his widower’s benefit would be the op-
timal thing to do. Again, the software
at https://maximizemysocialsecurity.
com can help sort that out, exactly
what’s optimal, and it very much de-
pends on the relative earnings of the
two parties.
AM: Great, we have a question come
in over the chat from Walter Richards.
He writes, “I’m 84 years old and I made
the mistake of signing up for Social Se-
curity three months before I turned 70.
I called Social Security to see if I could
change this, and they said no. What are
your thoughts on that, Larry?”
LK: If you’re within a year of having
filed for your retirement – how old did
he say he was?
AM: He said he’s 84, so this was a mis-
take made –
AM: A while back.
LK: You only have a year to withdraw
your retirement benefit application.
You have to pay back every penny you
got, you received, and then you can
kind of start from scratch, but he’s far
beyond a year after taking it. That was a
mistake and actually one of the things
I’ve recently found out that we didn’t
put in this book, because I didn’t know
it, is that if you’re trying to get your
age 70 benefit, and you go in a couple
months early, let’s say, or even maybe
you went in three months early, and
he says, I’d like to take my – we’ll say
Joe, goes in three months early, says,
I’d like to take my retirement benefit at
70. The Social Security clerk is free to
automatically give that person retroac-
tive benefits. So that person could ac-
tually be [Break in audio] benefits as if
he were trying to collect nine months,
the three months plus the six months
retroactive is nine months before age
70 and they won’t necessarily tell you
what they’re doing.
They will essentially just give you these
retroactive benefits because unless you
affirmatively tell them that you do not
want retroactive benefits, they have
the right, according to their traditions,
a staffer can just automatically give
you these retroactive benefits. It can
be even worse than this person. Sounds
like he lost three months in delayed re-
tirements credits. He could have lost
nine months in delayed retirement
credits.
AM: That’s scary. When you go in to
ask for your benefits, if you’re trying to
max out your Social Security, you have
to tell them specially, “I do not want
retroactive benefits.”
LK: You have to tell them, yeah, and I
wrote a column on that in Forbes, ac-
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tually today it got posted. If you Goo-
gle “Kotlikoff.” If you go to Forbes and
then – www.forbes.com and you search
for Kotlikoff, you’ll come up with that
column that I wrote today about it.
This is just another way in which So-
cial Security is screwing people out of
what they really have earned because
Social Security is thinking about this in
a very screwed-up way. They’re think-
ing about the idea that we do, we have
to give people their benefits as early
as possible, because they might die
and therefore they might not get their
benefits. Again, if they die, they’ll be in
Heaven; they won’t need any money.
The real concern is they live and they
live on a lower income because of So-
cial Security’s really stupid moves here.
and I – they used to tell people, Amber,
on their website that you should take
your benefit early because it’s a wash
whether you take your benefit later or
not and therefore you should take it
early because you might die.
That was on their website. I actually
had lunch with Steve Goss, who’s the
chief actuary for Social Security, about
maybe seven years, six years ago or so,
and I told him this is just crazy. This
is absolutely the wrong advice and be-
cause of our lunch, he changed the lan-
guage on the website. But it’s still very
much biased towards focusing people
on break-even on life expectancy and
the rules are such as to let these staff-
ers force you into doing something you
don’t want to do because they don’t
understand the difference between in-
surance and investing. This is – Social
Security is not an investment. It’s an
insurance product.
AM: I think that’s a really important
point to make, and, again, it just illus-
trates how important it is to be edu-
cated about these things before you go
and talk to Social Security. You men-
tioned that the real danger is living to
your maximum livable age and we did
have a question come in from Michael
Flippage, that he’s asking, “How can I
find out how long I’m going to live?”
I know we don’t know how long Mi-
chael’s going to live, but is there is an
actuarial calculator that you trust or
do you just sort of pick 100 and assume
that, or how can people think about
their life expectancy?
LK: What we really need is to have ta-
bles, and Social Security should be put-
ting this up on their website, which is a
distribution at what fraction of people
live to 100? What fraction live to 99?
How many live to 110? And how many
will live to those ages? To show people
the distribution of projected maximum
ages of life or ages of death. At what
age are people dying? That will give us
an idea of their – maybe that may not
be the right way to think about it, be-
cause the way, what I think really, to
think about it is to look at the people
who lived to the oldest age. What is the
oldest age to which people are current-
ly living, and there’s people out there
that are 105. My mom is 96. I think the
oldest age to which anybody has ever
lived that’s been documented is 122; it
was a French woman. I think that if you
don’t have any reason to believe that
your maximum age of life is for sure
some number that’s lower than 100,
think about using 100 or 110 or 120.
Whatever any maximum age of life
that’s that old or older will produce a
strategy that’s going to be the same
for a higher maximum age of life than
let’s say 100, I guess. The best strategy
if you have a maximum age of life at
100 is going to be the same as the best
strategy at 101 or 102, and that’s why
our Social Security software, https://
maximizemysocialsecurity.com, has
the default maximum age of life set
at 100. People can change that, but
we felt that 100 is the proper default.
We don’t focus at all on life expectan-
cy. We don’t have a software or any-
thing about break-even, even though
we have a lot of financial planners
who have been using our software, as
well as households, individuals use
our software; they’d like us to have
break-even analysis and I refuse to do
it because it’s dead wrong, and why are
they interested in break-even analy-
sis? Because what they’d like to do is
to get people to take their Social Secu-
rity benefits early so that these finan-
cial planners can then invest the mon-
ey and charge a fee on the investing.
That’s what’s going on here.
AM: That’s a great point. It’s not just
Social Security that’s going to give you
bad advice; your own financial adviser,
either it might be ignorant of how the
system works or it might have another
motivation. I think that’s a really –
LK: They may be innocent. They may
just not really understand how to think
about this. A large part of our book is
about just – the second chapter is real-
ly about how to think about Social Se-
curity as longevity insurance, because
that’s exactly what it is.
AM: All right, we’ve got a question
from Wade Laurent. He says, “My wife
and I work together. We’ve had about
the same earnings for many years. I
also have a small military pension.
With four years to go to 66, should
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we pay her everything from our small
company and not pay me to maximize
the overall Social Security benefit?”
LK: I think the IRS’s view would be,
you have pay people what they have
produced inside the ________, you can’t
just start allocating the income to try
and maximize the benefits. That’s, I’m
sure, illegal. There must be some pro-
vision in the law that says that manipu-
lating your reported earnings that way
is illegal. Having said that, you could
certainly have your wife work longer
and you work less and that would cer-
tainly pay her more because she is ac-
tually working more, and then again,
the software can tell you how much
that would raise her benefit and how
much that would reduce your benefit
and how much that would – whether
that strategy would increase the fam-
ily’s total lifetime benefits or reduce
them. There’s a way to find this out.
AM: A general question, Would it be
better for a couple, for each couple, for
each member of the couple, to earn,
let’s say $50,000 a year or would you
end up with higher Social Security ben-
efits if one spouse earned ____________
and the other earned $100,000, let’s
say, over the course of their lifetime.
Would that make a difference in the
couple’s overall benefit?
LK: It really depends on what their
earnings history has been up to
that point. It could be, for example,
that both spouses have been mak-
ing $80,000 a year. Now if you took
$100,000 and divided 50/50, that’s not
going to necessarily raise the benefit
for either of the spouses, because So-
cial Security looks at the highest 35
years of what are called index monthly
earnings. If we’re having one person
do all the work and earn 100 percent of
this, say $100,000, that would poten-
tially raise that person’s lifetime bene-
fits and therefore the family’s lifetime
benefits and not in any way reduce
the other person’s benefits because if
they even earn $50,000, it wouldn’t be
enough to raise their average. These
are good questions, but again, I think
you have to report honestly what peo-
ple are contributing to the company,
but a lot of questions like this, always
want to make sure that everybody un-
derstands that the IRS has a stake in
your answering these correct and put-
ting in the right values –
AM: You definitely want to stay on the
good side of the IRS.
LK: Exactly.
AM: We’ve got a question from Stan-
ley Sweener. He says, My wife is two
and a half years younger than he is, has
enough credits for disability, but not
enough for retirement. When she is 66
in six months, is there any benefit to
suspend or withdraw until age 70?
LK: Wife has enough benefits to col-
lect disability, but not enough to col-
lect Social Security on her own record.
I think if she can qualify for disability
benefits, she should go ahead and col-
lect those. That’s – depends on exactly
how old she is, but I think in almost all
the cases, you can’t get hurt by col-
lecting your Social Security – your dis-
ability benefits, if you’re not otherwise
going to be working. If you’re thinking
about giving up working or you real-
ly could work to collect disability, it
might be better to actually push along
and try to work even though you’re
working in pain or whatever. I assume
that that might not be easy for a lot
of people. It sounds like in this case
there is some margin of choice here.
The person is trying to decide “Should
I file for disability or not?” So they’re
not so disabled as to absolutely need
to file for it and in that case, earning
a full wage rather than what may be a
relatively small disability benefit is po-
tentially the better strategy in terms of
maximizing their lifetime income, but
it’s not just about Social Security. It’s
about if she’s making a full salary, then
it’s one fewer year that you have to pay
for yourself in retirement.
AM: Gotcha. We’ve got a question from
Kenneth Keller, and I think it’s proba-
bly on a lot of our readers’ minds. He
says, “I’m concerned about deferring
filings, since I think the government
will tweak the Social Security system
so bad to maintain solvency that my
future benefits may be reduced too
much. Should I file sooner rather than
later?”
LK: No, I don’t think that anybody
that’s close to filing or, let’s say 55 or
older, should worry about having their
benefits reduced, because the Amer-
ican Association of Retired Persons,
the AARP, has 60 million members.
This is the largest lobbying group in
the country. If Congress tried to cut
Social Security benefits, I think you’d
have a huge outcry, and those poli-
ticians would find themselves in bad
shape come Election Day. I think the
prospects here are that we’ll be having
– facing higher taxes on Social Security
contributions. I think we’ll see higher
taxation on Social Security benefits,
but I don’t see prospects for benefits
cuts, anyway not after somebody has
8www.bonnerandpartners.com
reached the retirement – I think if
somebody is close to retirement age,
close to 62 – I’m sorry 55 or over – I
think they have very small concerns
here about seeing their benefits cut.
AM: All right, so the message to Ken-
neth and folks who have that same
question is that, be patient, wait –
AM: Social Security?
LK: Yeah, don’t take a suboptimal
strategy because you think Congress
is going to cut your Social Security
benefits. It’s just –
LK: Exactly. Social Security’s in ter-
rible financial straits. It’s 33 percent
underfinanced. I want to be clear
about this and we’ve left an enormous
burden for our kids to pay for people
like you, Amber, your generation, and
my kids are a little bit younger than
you, and the country is broke. It’s 58
percent underfinanced. We need a
58 percent tax hike to pay for all the
spending the federal government has
in mind, including Social Security. If
you just look at Social Security, it’s 33
percent underfinanced. If you look at
a 33 percent tax hike immediately and
permanently, if you look at Detroit’s
pension systems before Detroit de-
clared bankruptcy, they were 20 per-
cent underfinanced. We have a huge
problem. It’s going to have to be dealt
with, but I don’t think it’s going to be
dealt with by abrupt cuts in Social Se-
curity benefits. I think it’s going to be
dealt with by higher payroll taxes and
higher personal income taxes and So-
cial Security benefits as well as taxes
in general.
AM: We have a question from a lot
of folks, who sound like they’re living
outside of the county. Vickie Mar-
tinez, for one, says, “When you live
in another country, is there a way to
continue to collect Social Security,
without living in the U.S.A. for six
months or returning to the U.S.A. one
day a month?”
LK: As far as I know – I may be wrong
in this, I’m not an expert on this – but
as far as I know, you can live 365 days
a year in a different country and still
collect your Social Security benefits.
They can be electronically deposited
in your U.S. bank account, maybe in
your foreign bank account, probably
just your U.S. bank account, and you
can then wire them to your foreign
bank account or just write checks
from your U.S. bank account. Where
you live does not affect your ability
to collect benefits. If you’re eligible to
collect Social Security benefits you’re
eligible, and you may be a green card
holder and the case is the same there.
You’ve been paying taxes. If you have
40 quarters of coverage, you can col-
lect retirement benefits, and even
if you just married an American and
you’re married for let’s say a year, you
can collect spousal benefits, even if
you’re not a U.S. citizen. You can also
collect widow’s benefits if he dies after
you’ve been married for nine months,
and he passes away.
AM: Let me keep an eye on – I know
we have a lot of folks that are consid-
ering retiring out of the country for a
lower cost of living and I think your
Social Security checks are going to go
a lot further in –
LK: We have a lot of Americans liv-
ing in Mexico right now, retirees,
and they come to the U.S. for medical
treatment covered by Medicare and
they’re getting their Social Security
checks, no problem.
AM: You did mention being covered
by 40 quarters. You’re talking about
how many credits you have, right?
We had a question from Jim Snyder,
wanting to know how to find out how
many credits he has.
LK: He should go online – it’s http://
www.ssa.gov, which is Social Securi-
ty’s website and check on – and pull
up his earnings history and he’ll see
how many quarters of coverage. You
don’t have to work a full year to get
four quarters. You can earn a lot in
one quarter and get four quarters of
coverage. You just work one quar-
ter of the year and still pick up four
quarters of coverage, so it’s import-
ant to know whether you have the 40
quarters, because if you’re close, you
certainly want to keep working and
get those 40 quarters and even if you
have the 40 quarters, again, Social Se-
curity is averaging 35 years of covered
earnings to figure out your benefits. If
it’s averaging over a lot of zeros, then
your benefit level is going to be low,
so working an extra year and having
that average include an extra year of
positive earnings can make a huge
difference to your lifetime benefits. It
can actually more than pay for the ex-
tra payroll taxes that you have to pay
for working that extra year.
Again, the Social Security software
that we have at https://www.maxi-
mizemysocialsecurity.com, can help
you figure this out because you can
see, What if I earned another year? If
I enter into this software another year
of earnings, how does my benefit go
up? How do my lifetime benefits go
up? You see that in two seconds.
9www.bonnerandpartners.com
AM: Great. We have a question from
Tom. Sorry, Tom, I’m not sure how to
pronounce your last name, so we’re
just going to call you Tom F., and I
think that this is a situation a lot of
our readers are in. Tom is a higher
earner, as is his wife, and he’s 60, and
his wife is 56, and he’s asking, “How
do we maximize our benefits?” I know
that’s a big, broad question and has
probably got a long answer, but if you
could talk generally about an older
spouse who is the higher earner and
the younger spouse who is the lower
earner, generally, what’s the right ap-
proach?
LK: Generally, Tom would want to
do this, which is to wait till his wife
reaches full retirement age and then
he should file for his retirement ben-
efit and suspend its collection. I’m
thinking he’s four years older than
she is; he might already be 70, and so
at 70 he certainly wants to start his re-
tirement benefits. I think in his case,
he doesn’t need to file and suspend
– he’ll just be taking his retirement
benefit at 70 –
AM: Tom is actually 60, and his wife
is 56.
LK: Oh, 56, so there’s a four-year
difference. When she’s at full retire-
ment age, he will be 70 and therefore,
he’s going to wait till – the optimal
strategy for Tom, I believe, is for him
to wait till 70, collect his retirement
benefit at its highest possible value,
again it’ll be 76 percent higher than
were he to start it at age 62, above and
beyond any inflation adjustment. His
wife then, at full retirement age, takes
just her spousal benefits. She doesn’t
file and suspend. She doesn’t file for
anything except her spousal benefit,
and then when she’s 70, she collects
her own retirement benefit. It could
be that her retirement benefit even
at 70 is less than her spousal benefit,
which is going to be equal to half of
Tom’s full retirement benefit. It won’t
be equal to half of Tom’s age-70 bene-
fit; it will be equal to half of Tom’s full
retirement benefit, which is a smaller
amount, but if she’s got a low earn-
ings history, her benefit may never get
any higher.
In fact, it would just equal half of his
full retirement benefit, so that’s got
the spousal benefit and that’ll be that,
and so he passes away, in which case,
she’ll get his age-70 benefit as a wid-
ow’s benefit, but on the other hand, if
she has a decent earnings history, it’s
likely that her age-70 benefit will ex-
ceed her spousal benefit and she’ll flip
onto this age-70 higher benefit, and
that’s going to maximize their joint
lifetime benefits.
AM: Great. We had a question from
Robert Perkins. His wife passed away
in 2010 and he now collects survivor
benefits. He’s going to turn 66 this
October and he’s wondering how his
spousal survivor benefits would im-
pact his Social Security payments?
LK: He’s taking widower’s benefits.
The question is whether he’s taking
his retirement benefit as well. If he’s
not, which I’m going to presume he’s
not, the optimal strategy –
AM: He’s not.
LK: Is likely to be for him to wait till
70 to take his retirement benefit. If he
takes his widower’s benefit, widower’s
benefit until 70, and then takes his
own retirement benefit.
AM: We just had a question come
in from Ina Hopp. She’s wondering
the flip side of the scenario that we
covered with Tom, where the higher
earner is the younger spouse, and is
there a different strategy in that sce-
nario?
LK: We’ve looked at these cases, too,
which is – you’d like the lower-earn-
ing spouse to be the one who takes the
spousal benefit at full retirement age,
but that requires the other spouse to
file for their retirement benefit, so
that would require filing early. We’ve
looked at this strategy, which we call
start-stop-start, and we talk about
this in our book, and in some cases,
it’s optimal to have the higher-earn-
ing younger spouse start their retire-
ment benefit early, even though that’s
going to reduce it in order to let the
older spouse collect a full spousal
benefit starting at full retirement age
and then when the younger spouse is,
again, the higher earner, reaches full
retirement age, they suspend their
benefit and they start it up again at
70. They stop it – they start it before
full retirement age, they stop it at full
retirement age, and they start it up
again at 70. That’s start-stop-start.
That is essentially a winning strategy
here in terms of the total family ben-
efits.
It reduces the younger spouse’s life-
time benefits, but it increases the old-
er spouse’s lifetime benefits, and, on
balance, the two may end up getting
more. I’ll just give you an example,
Amber, of an actual household. The
husband’s 63; the wife is 45; they have
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a disabled child, who was disabled be-
fore age 22. The wife is actually the
higher earner, but she’s only 45, so
she’s miles away from collecting any-
thing on her own record, but she’s
tried to stop working and take care of
the child. The 63-year-old – the op-
timal strategy our software showed
was for him to immediately file for his
retirement benefit, then to suspend it
at full retirement age, and start it up
again at 70, so this is the start-stop-
start, and that is going to permit his
child to collect a child benefit and his
wife to collect a child and care spousal
benefit. She can collect because she’s
taking care of a child beneficiary on
her husband’s – off of her husband’s
work record. That’s another benefit
that people aren’t aware of, which is
called child and care spousal benefits.
There’s something called a mother’s
benefit, if that 63-year-old was not
alive and died, the child could collect
a child survivor benefit, which is actu-
ally larger than the child benefit, but
then the wife could also collect – the
surviving wife could collect what’s
called a mother benefit, which would
be also equal to a big chunk of the de-
ceased spouse’s full retirement bene-
fit. In this case, the software said, yes,
it’s optimal to do the start-stop-start
strategy to maximize the family’s to-
tal collective lifetime benefits.
AM: Those are a lot of benefits to
keep track of.
LK: Yeah. You need to be aware – and
that’s where the book comes in. It’s
only – the book gives you a general
roadmap, and it’s really a very enter-
taining, fun read, because we were
pretty sacrilegious when it comes to
addressing what Social Security’s up
to – put it that way – and Paul Sol-
man, who’s one of my co-authors,
along with Phil Moeller, who’s a per-
sonal finance columnist; Paul is the
economics correspondence of long
standing for PBS NewsHour, and if
you’ve ever watched PBS NewsHour
and listened to Paul, you’ll realize in
an instant that he’s a really entertain-
ing person. He can convey on issues
better than anybody in the world as far
as I can tell and he writes extremely
well, so he and Phil have overcome my
economic nerdiness and put in a lot of
humor into the book, so the book is a
funny read as well as a useful read in
terms of making people money.
AM: Absolutely and I think you guys
did a great job taking a very hard col-
lection of subject matter and making
it readable and that was no easy feat.
LK: Thank you.
AM: We have a note coming from Pat
Nuremberg, who says, “Very import-
ant, Social Security Administration
doesn’t want to stop-start-stop any-
more. They only let one suspend the
benefits, if one is just beginning the
process, not if one has been collecting
since 62.”
LK: No that’s – she’s getting confused
between suspending a benefit and
withdrawing your benefit. It used to
be the case where you could withdraw
your retirement benefit filing decision
at any age. You could, for example,
file at age 62, start collecting your
retirement benefits at 69, withdraw
that decision and pay – you’d have to
pay back every single penny you re-
ceived, but then you could start from
scratch at a higher benefit level. Now
they only give you one year, and the
reason is that I and others started to
write about this option and then So-
cial Security clamped down on it; we
actually changed the law –
AM: They closed the loophole.
LK: But suspending a benefit is al-
lowed. You can start your benefit at
full retirement age, suspend it, and
then start it up again at 70; that’s per-
fectly legal, and again, a lot of people
at Social Security are confused be-
tween withdrawing your benefit and
suspending it, and a lot of people who
go to Social Security offices contact
me; they tell me that they’ve been told
this: “You can’t suspend your bene-
fit once you hit full retirement age.”
Absolutely, 100 percent wrong. You
can. It’s legal. Steve Goss was inter-
viewed the other day by Planet Mon-
ey. Planet Money is kind of reviewing
our book. It’s an NPR financial [Break
in audio] and the interview was with
me and Paul. They also… Steve Goss
is the chief actuary is a friend of mine,
and he said, right there, on the air,
yes, you can suspend your benefit and
start up later.
AM: Okay, if you get that advice from
Social Security, you can refer them to
their boss saying on the air that you’re
allowed to suspend?
LK: Yes. The best thing to do is just ig-
nore that bad advice, go to somebody
else at Social Security who knows
their stuff, or ask for technical experts
to talk to, because, again, you do not
want to ask Social Security what to do.
You want to tell them what to do.
11www.bonnerandpartners.com
AM: Pat is pushing back a little bit,
she said, though that she tried to ar-
gue, but they wouldn’t listen. You’re
advice to her would be to talk to some-
body else, go to a different office, get
someone else on the phone?
LK: Go to a different office. You can
call on the phone, yeah; I would go in,
talk to a technical adviser, a technical
expert, and they will – and if there’s
any problem, Pat could email me. She
can find my email address, and I will
tell her what provision of the Social
Security Program Operating Manu-
al System she needs to quote to that
Social Security staffer so that they un-
derstand what they’re supposed to do
here.
AM: Nice, that’s very generous of you,
Larry, thank you. Pat, you got Larry
on call. He’ll cite the law right back at
them, and I think he probably knows
more than the folks you’re talking to.
LK: Yeah.
AM: We just have time for a couple
more questions. Here’s one: James
from Houston, Texas. I know he’s a
Bill Bonner reader, because he’s ask-
ing, “How can I justify receiving bene-
fits, when there are fiats, that is to say,
not real money, but instead more debt
owed to Central Bank and that the
work they represent was stolen under
threat of violence from me, you, and
everyone else who has labored in this
country. The question is, is this dirty
money, and if it is, am I justified in
taking it?”
LK: What’s his name again, Amber?
AM: James.
LK: James. James, here’s what I’d say
to you. You’ve been forced to pay tax-
es; here’s a chance to get back money
that you feel you shouldn’t have had
to pay into the government. I don’t
share your view that we shouldn’t be
forced to pay taxes. We don’t live as
individuals. We’re in a society where
we need to have roads and defense
missiles, and public goods, and I also
believe that we should be forcing peo-
ple to save and buy insurance to have
disability, longevity insurance, and
have disability insurance and sur-
vival insurance because they will not
otherwise do it and therefore we will
all feel bad about these people who
don’t save for themselves or insure for
themselves, and then we’ll have kind
of a bad outcome relative to the one
in which the government forces us
to do something to take care of our-
selves in these bad events and that’s
also a public good if you look at it as
an economist.
If we don’t care about Joe, and Joe’s
not taking care of himself, we have a
couple of options here: We could each
give him a penny or two, but that’s
not going to be necessarily, going to
make us feel that good about Joe. We
could try and free ride and let some-
body else take care of him, or we
could force [Break in audio]. I think
the right answer’s to force Joe to take
care of himself, to save for his own
retirement through a forced saving
system, which is what Social Security
is. Now, that said, Social Security has
also been engaged in a massive Ponzi
scheme, so it’s not just forcing peo-
ple to contribute, but it’s taking that
money and giving it to older people
and then forcing younger people to
pay for those older people and con-
tinuing raising the benefits and con-
tinually going after younger people to
pay older people as opposed to having
a funded system where people really
have money in their own account; it’s
accumulated and they get a return on
it. That’s never been the way Social
Security’s operated. I agree with you
on a lot of issues, but not everything.
AM: Gotcha. Do you think that it
is possible for there to be a system
where folks are forced to pay in, but
the money is actually treated with re-
spect? Do you think that’s anything
that might happen in the future?
LK: I hope so. I have a proposal called
the Purple Social Security Plan, which
if you go to http://www.thepurple-
plans.org, purple is a mixture of red
and blue and so these are plans that
Republicans and Democrats can both
get behind. I have a proposal for how
to fix Social Security that would in-
volve personal accounts of progres-
sive contributions by the government
to low contributors so we have a pro-
gressive system, contribution sharing
between spouses. All the funds in-
vested in an index fund, so that Wall
Street doesn’t earn a penny on any of
this and the government guarantees
a zero real return, so that there’s a
downside to investing in the market
and then you get your money out of
this in an inflation-protected pension.
There is a very straightforward way
that we economists think things could
be fixed, and I’m hoping that some of
the presidential candidates will start
taking notice of this proposal.
AM: Yeah, we’ll see if that plays out
during the election. Just one more
question: John K. from Cottonwood
Heights, Utah, asks, “Have the Social
Security rules changed since the book
was published?” I’m just going to add
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an add-on question to that: How you
going to keep up – how is somebody
supposed to keep up with the changes
in the laws?
LK: They can review my columns at
PBS NewsHour or at https://www.
maximizemysocialsecurity.com. All
my columns are posted so that – and
I’m writing about any changes, so in
December there was terrible change
made that affects disabled people,
people on disability benefits, that de-
prives them of the ability to get a full
spousal benefit. In our book we are
talking about a strategy for your dis-
abled spouse to collect a full spousal
benefit, but one of the people that had
read one of my columns tried to actu-
ally get a full spousal benefit, having
been disabled, and Social Security, in
the dead of night, December 23, 2014,
they changed several sentences, and
deep in the bowels of this Program
Operating Manual System, and they
instantly deprived millions upon mil-
lions of disabled people from the same
opportunity that nondisabled people
have, which is to collect a full spou-
sal benefit and in the case of divorcés,
you can collect base divorcée – exes
can collect a full spousal divorcé ben-
efit.
In a married couple, only one can
collect a full spousal benefit given
the way the rules work, but anyway,
there’s an example of something that
we had wrong in the book, because
they changed the law after we wrote
the book, and we’re just going to keep
updating the book through time so
there’ll be probably a 2016 or 2017
edition of it that has all the updates.
AM: Okay, so look out for a new edi-
tion of Larry’s book. In the meantime,
read his columns on PBS, and that’s
all the time we have. Larry, we so ap-
preciate your time, and folks who are
listening, we’ll post the recording on
the Bonner & Partners website and
let you know just as soon as it’s up.
If you want to hear more from Larry,
like we said, he publishes every week
on PBS, just search for Ask Larry and
you can find all his past columns and
his excellent Social Security software
at https://www.maximizemysocialse-
curity.com. Again, you can find every-
thing at https://www.maximizemyso-
cialsecurity.com. Larry, thank you.
AM: Thank you.
LK: And to everyone listening, have a
great night.
LK: Thank you, Amber. Lovely to be
with you.
AM: Take care.