“I want to make sure we maximize our Social Security payments.”
“I am very concerned that we will make a wrong decision and leave Social Security money on the table.”
“My wife and I both took our benefits at 62. We are now in our 70s. Everyone I talk to says we made a huge mistake by starting our benefits early. I am so worried that we did something stupid.”
“I see programs on late-night TV that say there are hidden secrets to getting the most out of our Social Security checks. What are they?”
“I planned to take my benefits at my full retirement age. But my financial planner says that would be a huge mistake. He wants me to wait until age 70 to start my benefits. Now I am so conflicted!”
These are little snippets from just five of the dozens of emails I get every week, sometimes every day, from senior citizens who are worried sick that they are losing out on Social Security benefits or making decisions that result in dramatically reduced monthly checks from the government. And in almost all the cases I encounter, their worries are unfounded.
So, where did this national obsession with “maximizing” one’s Social Security payout come from? I have some ideas I will share in a minute. But first, a little bit of history.
I started working for the Social Security Administration in 1973. And my mentor was a guy who was with the agency almost from its inception in 1935. He retired in about 1980, and I retired in 2005. And in all those years, neither one of us ever met a Social Security recipient or a potential beneficiary who worried one little whit about getting the most out of his or her monthly benefits. “Maximizing” one’s Social Security was just not part of the lexicon. The majority of seniors signed up for their retirement benefits at 62. Some waited until 65 (the full retirement age for the first six decades of Social Security’s existence). A few people, and I mean a VERY FEW, waited until age 70 to start their benefits.
So, what happened? Why do today’s senior citizens lose sleep over an issue that didn’t seem to bother their parents and grandparents? I can think of a couple reasons.
First of all, in the late 1990s, some unintended loopholes grew out of a new law that allowed senior citizens over age 66 to work without any reduction in their benefits. Those loopholes became known as “file and suspend” and “file and restrict.” They have been discussed ad infinitum in this column and will not be explained here again, other than to say that, in a nutshell, they allowed retirees to collect dependent spousal benefits on a husband’s or wife’s Social Security record while delaying their own benefits until 70.
Congress eventually recognized that these loopholes violated a basic tenet of the program. What tenet? Well, benefits to spouses have always been classified as “dependent” benefits. In other words, to claim benefits as a spouse, you had to prove that you were financially dependent on the other spouse in order to collect benefits on his or her Social Security record. But the loophole was allowing people who were the primary wage earner in the family, and frequently quite wealthy people, to claim benefits as a “dependent” of the other spouse.
So, about five years ago, Congress closed that loophole. Or to be more precise, they immediately closed the file-and-suspend provisions and put a time clock on file and restrict. Anyone who turned 66 before January 2020 could still jump through the spousal benefit loophole. (And because there are still some people out there who turned 66 before January 2020 who haven’t filed for Social Security benefits yet, the loophole is still technically open.)
Anyway, that loophole introduced the term “maximizing your benefits” into the Social Security lexicon. And even though the loophole is almost closed, the term lives on—mostly on the internet. All you have to do is type “maximize Social Security” into Google or any other search engine and you will get hundreds, if not thousands, of hits.
And the second thing that happened to make seniors obsess about “maximizing” their Social Security is that financial planners discovered a new and huge market: greedy geezers! They lured them into seminars with come-ons like this one I got in the mail not too long ago: “You could be missing out on thousands of dollars in Social Security benefits!”
Of course, there is nothing wrong with getting advice from a financial planner. I just have problems with planners who use cheap gimmicks to lure naive and unsuspecting seniors into their front doors.
So, for these reasons, the term “maximizing your Social Security” became the catchphrase for a generation who, 40 years earlier, was chanting, “Make love, not war!” Now they are crying, “Make money, not love!” I mean, who needs sex, drugs, and rock-and-roll when you can have a bigger Social Security check, right?
And how do you get that bigger Social Security check? Well, as I mentioned earlier, if you are one of the lucky few to have turned 66 before January 2020 and haven’t signed up for Social Security yet, you might be able to use the file-and-restrict loophole.
But what about the rest of us? Well, the only real maximizing strategy there is boils down to one word: “Wait.” Conventional wisdom has it that the longer you wait to file for benefits, the better off you will be. So, wait until your full retirement age to get 100 percent of your benefit rate. Or, better yet, wait until 70 to get up to 132 percent of your benefit. In many “maximizing households,” the husband waits until age 70 to file for his retirement so that his wife will one day get higher widows benefits.
But that’s not necessarily always good advice. There may be a variety of reasons why you could be ahead to take your benefits earlier. For example, because of other income we had, my wife and I both started our Social Security at 62. We are now in our mid-70s, and we have never once regretted that decision.
Here’s a suggestion. Spend $10, and get my little Social Security guidebook called “Social Security: Simple and Smart.” There is a fact sheet in the book called “When to Take Your Social Security Benefits” that will help you decide what to do.
