Social Security Elections: Don’t Let Your Money Go Down the Drain

Imagine that you are sitting in your office at work and you realize that you left your bathroom faucet on before leaving your house. Water is pouring down the drain, lost forever—what a waste! Too often, our money is managed in the same way.

At Secured Retirement Advisors, our financial advisors who specialize in families in or near retirement often witness families making financial decisions that result in money going down the drain. These families are losing money by failing to correctly elect their social security benefits.

In retirement, you no longer go to work for your money—but instead your money needs to begin working for you. You transition from “How much can my money earn for me?” to “How much income can I receive from my money?" In retirement, you want to spend confidently and at the same time know that your money will last a lifetime.   

One element of financial success is to understand how to maximize your Social Security. Here are four strategies to get you on the right track with your Social Security elections.

Tip number 1: Understand Spousal Benefits

A spouse qualifies for Social Security benefits by 1) their own personal earnings history, or 2) receiving 50 percent of a spouse’s calculated benefits using their spouse’s full retirement age. Spousal benefits have several nuances that need to be looked at carefully. For example, spousal benefits elected prior to age 66, receive a steeper discount than early Social Security benefits elected under your own earnings history.

Tip number 2: Plan for Survivor Benefits

Regardless of which spouse passes away first, the lower of the two Social Security checks ceases when a spouse dies. The surviving spouse will receive the higher of the two social security payments for their remaining lifetime. Savvy retirees understand this important concept and maximize a higher earner’s Social Security benefit not only for their lifetime, but for the surviving spouse.

Tip number 3: The File and Suspend

To elect spousal benefits, the primary earner has to have applied for their own benefits. However, at age 66, the primary earner can choose a little known strategy called “File and Suspend.” This allows spousal benefits paychecks to begin, even though the primary earner continues to accrue 8 percent per year in deferred credits. Later, the primary earner can collect the larger monthly entitlements—a slick way for a couple to maximize survivor benefits.

Tip number 4: The Restricted Application

Consider taking a spousal Social Security benefit before electing a primary benefit. For example, a higher earning spouse can choose to elect a lower earning spouse’s benefits initially and continue deferred growth on their own social security entitlement—as long as certain planning rules are followed! Then, the higher earner switches a few years later to his/her benefits after enjoying an additional 8 percent growth. To accomplish this, make clear to the Social Security agent that a “restricted application” is to be filed which retains and preserves the right to switch over to one’s deferred primary benefits.

In conclusion, Americans are more cautious and pessimistic these days. Maybe it’s the economy, or maybe it’s just a lack of reliable information and good planning. The Social Security Administration reports that 72 percent of all current entitlement recipients began receiving benefits prior to reaching full retirement age. When making a financial plan, doing what everyone else seems to be doing, is often the wrong decision to make. Make sure your Social Security benefit plan is personalized for you.

To find out what’s at stake regarding your own Social Security planning, Secured Retirement Advisors has a simple calculator on its website. Use of the calculator is both anonymous and free. Simply enter your own personal information to see the difference between the best Social Security election option and a poor option. Surprisingly, the difference can be tens of thousands of dollars—which could simply go down the drain without the right planning.