By Andrew Hatherley on Oct 1, 2019
Social Security was never intended to be an income source that could support you in retirement. Rather, its sole purpose was to provide a safety net for people who were unable to accumulate sufficient retirement savings. For more than seven decades, the majority of Americans never gave much thought to their Social Security benefits – it was nothing more than a box they checked when it was time to collect. Today, an increasing number of people are starting to pay attention to their benefits, and Social Security Planning is becoming a vital element in securing a lifetime income.
How You Can Increase Your Social Security Benefits
The vast majority of pre-retirees, and for that matter, the majority of financial advisors, are unaware that there are many planning strategies that can unlock significant additional benefits from Social Security – all perfectly legal except you wouldn’t know about them unless you could completely decipher the legalese of the Social Security code. And we’re not talking about nickels and dimes – we’re talking about thousands if not tens of thousands of dollars that are available, but only if you fully understand your options.
How to earn DCRs while collecting Spousal Benefits
Assume both Mr. and Mrs. Smith each have an FRA (full retirement age) monthly benefit of $2,000. When Mrs. Mrs. Smith takes early retirement at age 62 she is not eligible for a spousal benefit because her $2,000 personal benefit would be greater than her $1,000 spousal benefit. However, since Mr. Smith has attained his FRA, he could file to have his spousal benefit based solely on Mrs. Smith’s SS record. Under this spousal only benefit option, he will not be receiving any of his personal benefits (should he choose to wait until age 70). Therefore, he will receive his $1,000 spousal benefit. This arrangement also allows his personal benefits to qualify for his 8% DRCs.
Alternatively, Mr. Smith could simply file and suspend his benefits until age 70 which will allow Mrs. Smith to qualify for her spousal benefits while his benefit accrues DCRs.
How to receive a spousal benefit while both spouses continue to earn DRCs
Mr. and Smith want to continue to work until age 70, but they would like to see if they can at least begin collecting a spousal benefit. Mr. Smith will have the higher monthly benefit so would file for his benefits and then immediately request a suspension of his benefits until age 70. This would allow Mrs. Smith to qualify for her spousal benefits. Meanwhile the both continue to earn DCRs for their own personal benefits. This will only work if both spouses have reached their FRA.
How to receive both a spousal benefit and an early withdrawal and have both spouses earn DCRs until age 70
Mr. Smith is at FRA age 66 and Mrs. Smith is 62. Mrs. Smith wants to collect early benefits. Mr., Smith can also file for spousal benefits based on Mrs. Smiths SS record which won’t affect his ability to earn DCRs on his benefit. At age 70 Mr. Smith suspends his spousal benefit and begins collecting his enhanced FRA monthly benefit. At age 66, Mrs. Smith files and suspends her early benefit which makes her eligible to earn DCRs until age 70, thereby increase her benefit by a third.
And these are just the tip of the iceberg. Yes it can get quite convoluted. Many of these strategies can be combined for even more enhanced benefits. However, any particular strategy may not be right for any one situation. But the stakes can get pretty high, making it worth the time, effort, and expense to work through all possible options as they might apply to your situation.
*This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 Advisor Websites.