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HowandWhenShouldYou File?KnowtheRules of Engagement

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A Quick Background

Social Security benefitsare anoften-ignored componentof retirement planning.Unlikeother retirement savingsvehicles, manyAmericans expect that Social Securitybenefitswill just bethere for them.And so far, that think‑inghas been true.The fact that Social Security benefitlevels do not fluctuatewith market downturns or interestratedeclines is a hugeadvantage.

However,just becauseSocial Security benefitsarereliable,doesn't mean the planningshould be ignored.In fact, they deserve careful consideration.WHEN youtake your benefitsand HOWyou take your benefits cangreatly impact the total lifetime benefityou can collect.It's important to know the rules of engagement so youdon't inadvertently leavemoney on the table. In fact.the averagemarried couple leaves roughly $14,000 oflifetime benefit uncollectedaccording to financial expertKenDavis.1

The Social Security’s Handbook has 2,728separate rules1governing benefits andmany code changes were enacted in 2000,so it ’s no wonder tha t many people fail tounderstand all of the opt ions available tomaximize their benefits.

The Fundamentals

Under Social Security guidelines, “full retirement age"(alsocalled “normal retirement age") varies accordingtothe year you were born. For example, if you were born in1946,your full retirement age is 66.You can find a retire‑ment age calculator online at ssa.gov.The earliest you canclaim primary worker Social Security retirement benefitsisage 62.When you reach full retirement age,you areeligible to receive full benefits.However,you can start col‑lectinga reduced benefit amount asearly asage 62. Ifyouwere born in 1946 and started collecting benefitsat age62,you would receive only 75 percent of your full retire‑ment benefit3.This is becauseyou are getting benefits forfour moreyears than you would have if you started at thefull retirement age of 66.

in addition,you can choose to delay the receipt of benefitsuntil sometime after your full retirement age.Apersonborn in 1946gets a delayed retirement credit of 8 percentfor each year of delay up until age 70,4 makingthis anattractive option for those with long life expectancies. ifyou take the maximum delay, it can increase benefitsby32 percent. meaningthat someone with a $2,000 benefitwould instead earn $2,640 every month for life!

Working spouses have options because they are eligiblefor either primary worker benefits or spousal benefitsof 50 percent of the other spouse’s primary insuranceamount -‐or both,as longasthe benefits are used oneat a time.

Social Security Benefits

if eligible, you can use any of these-g}benefits, but only one at a time. By:choosing which benefit to use at};which time, you can Strategically in Vcrease your lifetime.benefit[amountThe three types of Social Securl y;benefitsare: “ '7'

Primary worker benefitSpousalbenefit ,SurVivorship benefit,

Creative Strategies to Consider(For Married Couples)

Creative Strategies toConsider - Consider filing early if you are the low-earning

spouse: If you are the lower earningspouse. it oftenmakessense to collect your own benefitsat age 62and then switch to spousal benefitsat your full retire‑mentage.However,be careful that your spouse is notcollectingprimaryworker benefitswhen you beginyour benefits.According to Kotlikoff.“if you take yourown retirement benefit early and are below full retire‑ment age,you will be forced to take your spousal ben‑efit early and at a permanently reduced level if your

For Ex-Spouses:Make the mostof past relationships. lfyouwere married for at least 10years, andyoudid not remarry before age 60. you cancollect spousal and survivor benefits onyour ex-spouse?

For Survivors: spouse collects his/her retirement benefit before orReassess benefits when circumstances in the month in which you apply to collect your retire‑change.When your spouse dies,you need ment benefit"?to assess if it's best to continue your ownbenefit,orto re-fileand get the survivor‐ . Coordinate your start dates with the goal of$th benefit} The surviving spouse is eli- ‘ boosting benefits for the surviving spouse:gible for 100%Ofthe deceased spouse's Survivingspouses receive 100 percent of the other

I benefits, and can SWltCh from a primary spouse's benefit if they take the survivor benefitatworker benefitto aSuerVorShiP benefit. , or beyond full retirement age.The benefitwill includeDon’tforgetex‐spousesl lf a'person hasa y - 1,, any of the higher earner’s delayed retirement credits,spouse w ' .d dand an(ex-spouse! (with ‘_ ' ' and cost-of‐livingadjustments.Thewidow or widower' ' ' to d'alSo . can claim asurvivor benefitasearly asage 60, but the

benefitwill be reduced if the survivor collects beforefull retirement age.5

: Note: Kotlikoff warns that if you use this. strategy, it ’s important to pay your Medi‑care Part B premiums out of your own

I pocket during the suspense period. If youdon’t, Social Security will pay it for you

, and treat you as waiving (not suspending)your benefit which means you won't ge tyour DelayedRetirementCredit.2

Creative Strategies to Consider(For PrimaryWorkers)

' Use it or lose i t : If you don't use your Social Secu‑rity benefits.you will lose them. So. it agood idea tostart lookingat your Social Security options byage 60.The earliest primary worker retirement benefits startat age 62.And survivors can file for benefits at age 60.

- Waiting until age 70 may be advantageous:According to Laurence Kotlikoff.1your delayed-to‑age-70 benefit can beasmuchas76 percent higherthan your age-62 retirement benefit.adjusted for in‑flation. The reason is that your benefit is not reduceddue to Social Security’s Early Retirement Reduction;moreover. it's increased due to Social Security’sDelayed RetirementCredit. For many people. theincrease in the retirement benefit can beeven higherif they continue to earn money after age 62 thanks toSocial Security's Recomputationof Benefits.

- Consider the “Start-Stop-Start" strategy: Ifyou’re under age 70 and already collecting benefits.you can suspend benefits and restart them at age70. In some cases. this could result in up to a32 per‑cent benefit increase. for the rest of your life.1 Thismeans a $2.000 benefit could become $2,640!

Resources

“44 SocialSecurity Secrets all BabyBoomersandMillionsof Current RecipientsNeedto Know ‐ Revised!"byLaurenceKotiikoffhttp://www.producersweb.com/files/b/6d/6d5c60484fd23295e662c56635fOOCf7.pdf

KenDavis.CLU.ChFC,CFPasquotedon ProducersWEB.comin anOctober 16.2012 interviewwith SteveSavantbyLaurenceKotiikoffhttp://www.producersweb.com/r/pwebmc/d/contentFocus/?pclD=c1725d10b52252cbce5127ce45b45957#

SocialSecurity calculator athttp://www.ssa.gov/retirement/1943.htmi

SocialSecurity Earlyor LateRetirementPage:http://www.socialsecurity.gov/OACT/quickcalc/earlyJatehtml

Klpllnger.com.January 13,2013 “Strategies to BoostYour SocialSecurity"BySusan 8.Garlandhttp://www.kiplinger.com/articie/retirement/T051-COOO-8004-strategies~to-boost-your‐sociai-security.htm‑l#MRb50AiWclYQzlpf.99

KenDavis,CLU,ChFC.CFPasquotedonYouTube inaJanuary 19.2013 interviewwith SteveSavanthttp://www.youtube.com/watch?v=-5apbsoijE

KenDavis,CLU.ChFC,CFPasquotedonYouTube inaOctober 17,2012 interviewwith SteveSavanthttp://web.pw.sbmcloud.com/r/pwebmc/d/contentFocus/?pciD=f181fcd510ed250c254ddf729586a157#

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