Creative Strategies to Help Maximize Your Social Security Benefits

By Kevin Russell

Start and Suspend Strategy:

For married couples, spouses can collect the greater of the amount credited for their own earnings or an amount that is half of the other spouse’s benefit. In a situation where you earned much more than your spouse during your working years, your spouse will likely file for spousal benefits based on your earnings history rather than filing for benefits under their own history. The “start and suspend” strategy permits the lower income earner to collect spousal benefits when the higher-income spouse postpones benefit collection. To accomplish this strategy, you would file for your benefit when your spouse reaches full retirement age, then immediately suspend your benefits by filing the appropriate forms with SSA and defer taking your benefit until age 70, at the point which you collect the maximum benefit. This annual increase by deferring your benefits can be sizable depending on your birth date, anywhere from 6.5% to 8.0% in increased benefit per year.

As an example, Mark and Martha are both 66, and Mark can file for Social Security benefits under his work record and receive $2,000/month. Since Martha’s benefit, based on her own work record, is lower than half of Mark’s benefit, she has elected to file under Mark’s work record. In the situation where Mark will continue to work or wishes to defer taking his benefit until age 70, Martha could begin receiving half of Mark’s benefit by having Mark file for Social Security and then immediately suspending his benefit. This would allow them to have some Social Security income prior to 70, and the bonus of letting Mark’s benefit accrue the delayed retirement credits of 8% per year of deferral, potential inflationary increases, and additional credits from paying into Social Security if he continues to work. This strategy is particularly beneficial if Mark expects an unusually long lifespan, and they have adequate assets or income sources to meet their retirement needs. The longer Mark lives, the greater the advantage of delaying the start of his benefits.

Spousal Piggyback Option:

A second strategy is also related to your spouse’s benefit. If you are between full retirement age and 70, and your spouse is receiving Social Security benefits, you can choose to file and receive benefits on just your spouse’s Social Security record and delay filing for benefits on your own record until age 70. By filing for benefits on your spouse’s record, you may receive a higher retirement benefit on your own record later based on the effect of delayed retirement credits of 8% per year. You can earn delayed retirement credits up to age 70 as long as you do not collect your own benefits.

As an example, John and Joann are both 66, and Joann has elected to file for benefits under her work record for $2,000/month. John can also file for his benefit under his work record for $2,200/month or half of his spouse’s benefit. He elects to file under Joann’s record and defer taking his benefit until age 70. For each year of delay, John’s benefit will grow by a delayed retirement credit of 8% annually. At age 70, John’s current $2,200/month benefit will get bumped up to roughly $2,993/month when he switches to the benefit based on his earnings. This strategy is particularly beneficial when each spouse’s benefits under their own earnings are similar in amounts, the spouse who switches expects an unusually long lifespan and both spouses have adequate assets or income sources to meet their retirement needs. The longer John lives, the greater the advantage of delaying the start of the benefits.

Claim and Repay Strategy:

A third strategy involves filing for Social Security benefits as soon as you retire. Prior to turning 70, you would file the appropriate form with the SSA and repay the benefits that you have received – interest free. Then you would re-file at age 70 for the higher benefit. This strategy will give you access to your benefits in your 60s, and you will receive maximum monthly benefit checks after age 70, the same as you would have if you had never filed the first time. Obviously this strategy works if you have the assets to pay back SSA for the benefits received by either coming into a lump sum of money via inheritance, lottery or not spending the benefits received and investing wisely. As with the other unique strategies, the greater your longevity the greater the benefit of deferring benefits past your full retirement age. As a note, when you pay back you receive the credit for the tax on all previously taxed Social Security benefits.

These are very unique strategies, and they do not apply to everyone. Longevity and retirement income needs from your portfolio have a significant impact on the appropriateness of these strategies. The Social Security Administration has several online benefit estimators that can help you make an informed decision. Our advisers at FIM Group are also happy to answer your questions or discuss your unique situation.