7 ways to maximize your Social Security benefits

Secrets of a dream retirement
Secrets of a dream retirement

Social Security: Pay into it your entire career, collect benefits in retirement. Simple, right?

Actually, no.

Figuring out the best time to apply for benefits -- and which benefits you're eligible for -- involves headache-inducing calculations and navigating more than 2,700 rules governing the program's payouts.

Make the wrong decision and you could leave tens of thousands of dollars on the table, if not more, according to economist Laurence Kotlikoff and financial journalists Philip Moeller and Paul Solman, who coauthored the book "Get What's Yours: The Secrets to Maxing Out Your Social Security."

"You can be a very smart, sophisticated person yet be completely oblivious to what's due you," they note.

Sadly, there is no one-size-fits-all rule. But the book offers different strategies to maximize your benefits depending on your marital status, age, earnings, and financial needs, among other considerations.

Here are some of the key takeaways:

1. It pays to wait. You may start collecting Social Security retirement benefits as early as age 62. But the longer you wait, the more you -- and your spouse or ex - will be paid.

Wait until you're 70 and your payment will increase by 76%.

That's because you earn so-called delayed retirement credits, which are equal to 8% a year plus inflation for every year you delay claiming benefits past full retirement age. That's age 66 for people born between 1943 and 1954, and 67 for everyone born after 1960.

There is, however, no advantage to waiting past 70 because, at that point, the delayed retirement credits stop accruing.

2. Know whether you're eligible for more than just your own retirement benefit. If you're married, divorced or widowed you may also be able to claim a "spousal" or "survivor" benefit based on the work records of your spouses and exes, whether they are alive or dead.

That assumes three things, however: you were married for a certain period of time (minimums vary), you don't remarry too soon and you're strategic about when you apply.

If you're married, one of you may claim a full spousal benefit, which is equal to one half of your partner's retirement benefit.

If you're divorced, you and your ex each may claim a spousal benefit based on the other's retirement benefit, assuming you were married for at least 10 years.

If you're widowed, your survivor's benefit can be as much as 100% of your deceased spouse's full retirement benefit. But, in some instances, your survivor benefit will be reduced, depending when you take it.

3. Don't file for two types of benefits at once: If you're eligible for a retirement benefit and, say, a survivor benefit, you'll lose out on one if you file for both simultaneously.

"You can only collect roughly the larger of the two" in that instance, notes the book's authors.

Typically, the better strategy is to take the smaller benefit first, then claim the larger one.

Take 62-year-old Edith, who lost her husband before he could claim any benefits. At her age, she is eligible for her own monthly retirement benefit ($1,800) and a survivor benefit ($2,000).

But if she claims both at once, she'd only receive a check for $2,000 a month for the rest of her life.

She'd do better to claim her retirement benefit at 62, and wait until age 66 -- her full retirement age -- to claim her survivor benefit, which will now equal what would have been her husband's benefit at his full retirement age -- $2,469. That way, she'd get $1,800 a month for four years, then $2,469 a month for the rest of her life.

"That's a 23% higher real benefit from age 66 to her death," the authors' note.

With that higher payment, it would take Edith less than two years to make back the $200 a month she forfeited from ages 62 to 66.

4. File and suspend ... for your spouse: For your better half to get a spousal benefit, you have to file for your own retirement benefit first. But if you also want your benefit to grow until age 70, you can file at your full retirement age but suspend collection until 70.

5. Want to get divorced? You both might prosper. If you've been married at least 10 years and get divorced, you could both be eligible to claim full spousal benefits while postponing your own to let it grow.

That's a distinct advantage over married people. In a married couple only one person can claim a spousal benefit, whereas both members of a divorced couple can do so.

"Divorced people can get something married people can't, namely two free full spousal benefits rather than just one," according to "Get What's Yours."

To qualify, you need to have been divorced at least two years and have reached your full retirement age without having filed for your benefits. And your ex needs to be at least 62 or receiving disability benefits.

Firefighter free falls into retirement
Firefighter free falls into retirement

6. Don't remarry before 60: Remarrying before you're 60 means you lose your right to claim spousal benefits on an ex's work record so long as you remain remarried. If your spouse or ex is dead, you can't claim a survivor benefit if you remarry either unless you do so after you turn 60.

7. Getting hitched can pay: Being married has its stresses, but it also may offer you a better Social Security deal than being forever single.

If you're married just one year you're allowed to collect a full spousal benefit. And you may claim survivor benefits if your spouse dies after you've been married at least 9 months.

If figuring out how to maximize your Social Security benefits makes you flip your wig, "Get What's Yours" can be a helpful resource. But online software programs can help, too.

Some - such as Social Security Solutions and Kotlikoff's Maximize My Social Security - will charge a fee but generate a plan based on your specifics. For more of a ballpark assessment, there are some free online calculators, including one from Financial Engines and T. Rowe Price.

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