If you read a recent USA Today article, you would have seen a story with this intriguing headline: “3 steps to claiming the $4,555 max monthly Social Security benefit.” And if you are pushing retirement age, you would of course want to read that story and get yourself locked into a heaping serving from the Social Security gravy train.
In a nutshell, the story says this. To get a maximum Social Security benefit, you’ve got to do these three things: 1) work for 35 years; 2) earn the maximum Social Security taxable salary every year; and 3) wait until you are 70 to claim Social Security.
But that promise of maximum benefits was very misleading. I mean, think about it. Who is going to read an article headlined “3 steps to claiming the $4,555 max monthly Social Security benefit?” It is very likely going to be someone pushing Social Security age. In other words, someone in their late 50s or early 60s. Well, if you’re already that age, there is absolutely nothing you can do to change step 2. (Most people earn far less than the Social Security maximum taxable base—currently $160,200.) Obviously, you can’t go back 35 years and change your earnings history.
Or to put that another way, unless you happen to be that relatively rare person who has earned the maximum Social Security wage for the past 35 years, the article is totally meaningless to you.
Or to put that yet another way, the article only works if it is read by someone in their early 30s who would say: “Oh, gosh, if I want to get the maximum Social Security benefit, I better earn the maximum Social Security salary for the next 35 years and then wait until 70 to claim benefits.” And I will bet my next Social Security check that not very many people in their 30s are going to read any kind of article about Social Security.
So why did USA Today run such an article? I can just picture the editors of the newspaper sitting around saying something like this: “We know a high percentage of our readers are old folks. And what topic are old folks most interested in? Social Security, of course. And what do they want from Social Security? More money. So let’s do a story about how they can get the maximum Social Security check.”
But then they don’t think that through and realize that there is absolutely nothing an average wage earner who is now pushing Social Security age can do to claim “the $4,555 max monthly Social Security benefit.” Yet they run the story anyway and cause a whole lot of readers to rue the fact that they can’t get a ticket on that Social Security gravy train!
That newspaper story just reminds me of a point I’ve made many times in this column. So many senior citizens are absolutely obsessed with the notion that there is some secret to getting more money from Social Security that they don’t know about.
So assuming you are one of the many people who haven’t earned the maximum Social Security wages for the past 35 years, is there anything you can do to maximize your benefits? Well, that gets us to Step 3 in the USA Today column. Supposedly, you should “wait until you are 70 to claim Social Security.” But as I’ve also discussed many times in this column, that may be good advice for some, but not for everyone.
For example, if you’re not in the best of health, or if you were simply born with the wrong genes as I was (my dad and almost all my uncles died before age 60), then why wait until 70 to claim benefits? Chances are you simply aren’t going to live long enough to make up for the money you'd lose by not starting your benefits at your full retirement age, or even sooner.
Or even if you’re a senior who is fit as a fiddle, there is a rising chorus of financial planners who are now recommending that people are better off to take their benefits at full retirement age rather than delay them until 70.
In many ways, this maximizing obsession makes me pine for days gone by. Back when I was taking Social Security claims several decades ago, no one worried about this. Most senior citizens generally filed for their Social Security benefits at 62, and they didn’t bat an eye or fret one little whit about their decision. The term “maximizing your Social Security” wasn’t even part of the lexicon.
I’m not necessarily saying that was a good thing. Obviously, it makes sense to plan for your retirement, consider your Social Security options, and make a decision about when to start your benefits based on the planning you’ve done.
But my point is this. Don’t obsess about it. For one thing, no one really knows when the best time is to start their Social Security is because no one really knows when they are going to die. For example, I knew an older guy just down the block from our house who was known around the neighborhood as a fitness fanatic. He was always out running every day, even in his 60s. And about a month ago, he died at age 71 of a massive heart attack.
And there is also this point. Almost all seniors who get in touch with me today fretting about their Social Security choices are not between a rock and a hard place, financially speaking. When it comes to Social Security, they are between a pillow and a soft place. No matter which way they choose to go with their Social Security start date, they will generally come out OK. Here is a question I got not so long ago.
If you wait until age 70, you will get about an extra 30 percent added to your benefits. So you would get about $4,000 per month. That’s $890 more than you'd get if you start your benefits now. But of course, by waiting until 70, you would have lost out on 42 Social Security checks totaling $130,620. So do you want the $130,620 pillow? Or do you want the soft place down the road with the extra $890 per month? Pick one and be happy. As I said, you really can’t go wrong. (Oh, and by the way, I am coming at this from a Social Security perspective only. You would also have to consider the tax implications to your decision.)
